Crunch time for emerging Europe

A reduction in foreign capital flows means that many banks in eastern Europe are indirect victims of the credit crunch.

The US and western Europe are not the only regions facing a credit crunch. Parts of central and eastern Europe are undergoing financial stresses of their own – and in some cases the situation is getting very ugly.

As the IMF’s recent Global financial stability report makes clear: eastern Europe includes several countries that have been heavily dependent on foreign capital flows, largely debt, in financing big current account deficits, and they are now acutely vulnerable.

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