THE BLOG'S THREE MAIN OBJECTIVES:
~*Revealing and Getting Rid of Scams | Creating Honest Sustainable Wealth | Offering Happiness, Safety and Legitimacy*~

Friday, 6 March 2009

Eastern European central banks lash out over comments on region

By Michael Winfrey and Gareth Jones

PRAGUE/WARSAW (Reuters) - Eastern European bank supervisors expressed concern on Wednesday about "misleading" comments on risks in their financial sectors, and said they could hurt the region's economies and banks.

Poland's central bank governor also said he wanted to start talks with the European Central Bank and the EU's executive to limit aid to "financial institutions that speculate on financial markets" in emerging Europe.

The EU's eastern members came under sharp scrutiny last month when mainstream global media posted front page stories about the long-building economic imbalances in some states, with some articles including references to the region as "the sub-prime of Europe."

Officials in better-off states like the Czech Republic and Poland have tried to fight back, saying they are far different from regional laggards Hungary or Latvia, which have sought IMF-led bailouts to shore up their economies.

In a joint statement, supervisory authorities from Poland, the Czech Republic, Slovakia, Romania and Bulgaria said "publicly announced initiatives" highlighting the exposure that banks in western EU members have to central and Eastern Europe were undermining their efforts to uphold stability.

"The published information... are often oversimplified and misleading, and it can have a negative impact on banks that are operating in these countries," said the statement, published on the Slovak central bank's website.

"Such self-fulfilling speculation totally disregards fundamental economic developments in the CEE countries and creates misperceptions that could inevitably be detrimental to both the CEE region and Europe as a whole."

The statement did not specify what it meant by "publicly announced initiatives."

Analysts, who note the once-booming region is facing at best a massive slowdown in growth, were unimpressed by the central banks' statements and said it would do little to calm market nerves around the region.

They noted Hungary was not among those that had signed and said a lack of clear policy for the region as a whole continued to undermine the situation, regardless of whether some countries were economically stronger than others.

Hungary's forint on Wednesday fell 2 percent to a record low of 310.56 per euro as investors shorted it against its regional peers. The Polish zloty and Czech crown, in contrast, were more or less steady.

SPECULATORS

Polish central bank Governor Slawomir Skrzyrpek criticized "speculators," a growing trend in the region's largest economy in which media and politicians have blamed foreign investment banks for a 33 percent drop in the zloty currency since July.

"Our aim should be to implement measures that would limit incidence of granting public help to financial institutions that speculate on financial markets of the new member states and emerging economies," he said.

"I shall endeavor to initiate a discussion on this subject within the ECB and the European Commission."

Analysts were skeptical such a move could gain any ground, particularly with western EU members scrambling to uphold their banking sectors with billions of euros in capital injections and in some cases the outright nationalization of flagging lenders.

"The statement doesn't give any hints of new policy measures to shore up individual markets, and that's disappointing," said Koon Chow, a strategist at Barclays capital.

"Also, a bit incongruous is the absence of Hungary in the statement, which once again underscores problems in policy cohesion among EU members, and this statement underscores the lack of cohesion among the new EU members."

Chow and other analysts have suggested that markets will not begin to differentiate between the fundamentals of different states until they all agree on a common plan to underpin confidence in the region as a whole, possibly including EU and IMF funds, ECB credit lines, and other emergency measures.

(Additional reporting by Warsaw bureau)

© Thomson Reuters 2009 All rights reserved.

No comments:

Goldman Sachs Information, Comments, Opinions and Facts