Speaking at the annual meeting of the European Bank for Reconstruction and Development on May 15, Herbert Stepic, chairman of Raifeissen International, said Austrian government assistance to the country's banks that are also systemically important in emerging Europe had already allowed them to "continue financing five-year loans in our markets, at a time when the short-term money market came to a standstill."
He added that, "without the fast action of the EU governments, the whole banking system of central and eastern Europe would be in even more trouble."
Mr Stepic said the promise extracted by the IMF from Western European banks with subsidiaries in emerging Europe to maintain activities there was "totally useless. None of us even thought to withdraw funds or capital, but still we are being asked to sign. The banks that were not there on the ground have withdrawn, and those are the ones that the IMF should go after."
Net financial inflows to the region fell from an estimated €460bn in 2007 to €240bn in 2008, and Mr Stepic warned they could be as low as €30bn in 2009.
Dr Gyorgy Suranyi, head of CEE for Italy's Banca Intesa SanPaolo, echoed Mr Stepic's commitment to the region. "We will not pull the rugs from under our own banks, it is self-interest not to do that. None of the systemic banks withdrew a single cent, we bought these banks not for a fortnight, but for thirty years or more. But beyond us, there were other banks, hedge funds and mutual funds that were extending credit who have already withdrawn. We will not be able to fill all of that gap," said Mr Suranyi.
He added that any withdrawal of funds by EU banks from emerging Europe would have hurt the core EU economies themselves - around a quarter of Germany's exports now go to central and eastern Europe.
However, Mr Suranyi, who was previously governor of the Hungarian central bank, also warned that fiscal policy in emerging Europe has not been entirely helpful. "In Western Europe, we have seen anti-cyclical fiscal and monetary policies in response to the crisis. But in central and eastern Europe, we have seen some pro-cyclical policies that will make the slowdown deeper," he said, including budget cuts urged by the IMF.
And Mr Stepic sounded a warning about upcoming elections in major EU economies, saying they might change the behaviour of Western European governments towards the emerging Europe operations of banks they have assisted financially. "As long as reason governs decisions, that [supportive attitude] will continue as it is the only proper way. But if we get nationalistic stances in election campaigns, then it will become a matter of political discussion," he said.
