The Global Crisis effects on eastern europe and central europe

First of all lets clarify where central europe is, we are not talking about the eastern block (a common confusion) but this region in this picture

There is no escaping the difficulties facing central and eastern Europe. The region is heading for its first big recession since the collapse of the Soviet Union, with banks under pressure, investment plunging and unemployment rising fast.

The outlook for the more vulnerable states is terrible. Hungary faces a drop in gross domestic product this year of about 5 per cent, Ukraine up to 10 per cent and Latvia 12 per cent.

But it is wrong to condemn the whole region on the basis of the headline-making and market-breaking worst cases. Amid all the gloom and doom, there are glimmers of hope. First, some countries are faring far better than others, notably Poland and tiny Slovakia, where economists still expect growth of perhaps 1 per cent. Low as it is, the number is higher than for any west European country.

Next, eastern Europe’s economies are already proving to be more flexible than western Europe’s in responding to the crisis. While companies are axing jobs almost everywhere, they are going much further in eastern Europe in cutting pay for the remaining staff. Even though wages are much lower than in the west, private employers are making reductions of up to 30 per cent. Governments too are biting the bullet – notably in Latvia, where ministers have taken a 15 per cent hair-cut and are preparing something similar for civil servants. Nobody wants to be treated like this but years of economic turmoil mean east Europeans are better prepared for such shocks than west Europeans.

Also, with less developed economies, east Europeans often enjoy closer family ties than western Europeans, including links with relatives still living on the farm. If the crisis hits poor people hard, in Romania, for example, they can turn to these traditional sources of support – an option that barely exists in western Europe.

Finally, the vexed issue of eastern Europe debt should be kept in perspective. The gross external bank debt of eastern Europe – including Russia, Turkey and Ukraine – of $1,700bn (€1,295bn, £1,215bn) as reported to the Bank for International Settlements, is huge. But, as Erste Bank says in a recent report, this must be seen in context: in western Europe, the UK alone has gross external bank debts of $4,500bn.

What matters in assessing potential vulnerability are net positions, where debts are offset against claims against other countries. Erste calculates that on a net basis, the largest borrower, relative to economic size, is Malta, with net bank debts of more than 300 per cent of GDP, followed by Ireland with more than 200 per cent. For Hungary, a country often seen as debt-laden, it is 55 per cent.

Similarly, household and corporate debts are well below west European levels. Total domestic bank assets are 100 per cent of GDP in central Europe compared with 250 per cent in the eurozone. As for public debt, only Hungary comes close to the eurozone average of 70 per cent of GDP. Other east European states are below 50 per cent. Italy, by comparison, is over 100 per cent.

Plugging these gaps requires increased support from the international banks that dominate the region and from multilateral institutions, notably the European Union, the International Monetary Fund, the World Bank and the European Bank for Reconstruction and Development.

But the job is not impossible. The combined GDP of the EU’s new member states, the prospective members in the western Balkans and Ukraine is about 10 per cent of the old EU’s GDP. Given a bit of breathing space, the region’s key competitive advantage – low-cost high-skill labour – will reassert itself. In the short-term, eastern Europe cannot do without western Europe’s financial support. But in the long-term, west Europe will need eastern Europe just as much.

Euro zone economic contraction slows accrding to euronews

There’s been a little bit of good news on the euro zone economy.

The latest data suggests a slight easing in the region’s economic contraction in March. That was not expected by financial analysts.

The Flash Euro zone Purchasing Managers Index shows activity in the services and manufacturing sectors still falling but at a slower rate.

Even so, companies coping with sinking demand and the reluctance of banks to lend continued to slash jobs to cut their costs.

the new US treasury secretary on how management salaries..

Courting Volkswagen, it looks like the car sector in Slovakia will benefit from further german investment

"Bratislava is home to one of Volkswagen's factories, which stands out for its high quality. For this reason as well as on the grounds of good conditions for futher investments, Slovakia is considering pushing for the manufacture of a new Volkswagen in Bratislava," said Fico, who will further discuss the issue with Volkwagen managers later in the day.

Fico during his one-day visit to Germany noted that the Government granted investment stimuli for this purpose last year. "We have a high-quality, not-too-expensive labour force, a favourable business environment. We've adopted the euro virtually problem-free, and unlike other countries we have a very stable political situation," said Fico, listing the further advantages of doing business in Slovakia.

The two also talked about measures to be taken to counter the effects of the global economic crisis. They saw eye-to-eye in that they favour joint European action, repudiate any expression of protectionism and stress that prior to adopting fresh measures it is necessary to evaluate the effects of previous ones.

"I welcome the words of Slovak Premier Robert Fico, who spoke out against dumping, protectionism and the race for subsidies. We have to find a common Europe-wide language here," stressed Wulf.

"Either we act within the EU based on solidarity and survive, or everyone acts on his own account and all of us will lose," weighed in Fico.

The Government approved the investment state aid by way of personal income-tax relief worth €14.3 million in December. The carmaker should spend this on expanding its production range by a new model to be made at its factory in Devinska Nova Ves near Bratislava. The investment would be spread over a period of three years and would create 760 new jobs.

anglosaxons summarised

World-wide house-price indicators | A dizzy descent for Britain

The asset bubble is deflating precipitously, the situation in Slovakia is mixed with tiny declines. The biggest declines have occured in highly speculative and extremely over-priced developments, that always felt out of kilter for locals.

The table below shows how bad things are elsewhere however...

Bonuses for American financiers are in the firing line, and other news | The week ahead | The Economist

This model of society organisation is bankrupt ethically as well as financially, but even more so from an efficiency point of view. Failure and incompetence is rewarded. Boom and bust is rewarded.
We need to change all that in every country.

"BONUSES paid to employees at AIG, a big insurer rescued by America’s government, will stay under the spotlight. Public outrage and lawmakers' anger have steadily mounted as it has become clear that executives will share $165m in bonus payments, even after AIG received $170 billion of aid to keep it afloat. On Monday March 23rd the Senate will consider a House proposal to tax bonuses awarded to financiers at insitutions in receipt of bail-out cash at 90%. The next day the House Financial Services Committee will grill both Ben Bernanke, chairman of the Federal Reserve, and Tim Geithner, the Treasury secretary, over AIG's bail-out and bonus packages. Mr Geithner is under particular pressure, not only because of AIG’s bonuses but his botched unveiling of a bank-rescue plan."

Slovakia votes in Presidential poll - Slovakia : news, world | euronews

The first round of presidential election will take place on Saturday, March 21st from 7am to 10pm. The voters can choose from seven candidates, including the incumbent president. Slovak Republic as a parliamentary republic does not provide the president with influential powers. The Slovak president is ceremonial but he has some veto powers for legislation. He also represents Slovakia abroad.

He can also recall the Prime Minister in case of a vote of no confidence. In the same case he can also recall the ruling government. The president signs laws passed by the Slovak Parliament. He also has a right of veto and can return laws to parliament with comments attached.

Vienna expands towards Bratislava

Austria's capital is expanding north of the Danube towards Bratislava through the development of a new ultra-modern district on the former aerodrome in Aspern, which will give new stimulus to the "Centrope" region.

The City of Vienna is approving an ultra-modern urban development north of the Danube where Austrian racing legends like Jochen Rindt and Niki Lauda practised decades ago on the abandoned runways of the aerodrome in Aspern, General Motors (GM) has been writing modern automotive history since 1982 and many smaller companies have installed themselves. In the next 20 years a 240 hectare area around the former aerodrome will be converted from an industrial zone into a complete urban district based on state-of-the-art standards.

The master plan has already been drawn up and presented to the press by Executive City Councillor for Urban Development, Traffic and Transport Rudolf Schicker, who is hoping that the area will become a hub for business, research and technology. It is halfway between the city centres of Vienna and Bratislava, reachable in 22 minutes by underground on the extended U2 or in 28 minutes by suburban railway, and is certain to give new stimulus to the "Centrope" region.


Ring road, public transport, artificial lake, geothermal energy
Neu-Aspern will feature ultra-modern architecture and will be the first district of Vienna to have a full public transport infrastructure from the outset. The U2 is to be extended by 2012 by two stations, one in the centre of Aspern and another one on the existing Ostbahn track. This will make it possible to travel via Untersiebenbrunn and Breitensee in Lower Austria to Vienna's twin city Bratislava. At the same time it will enable automotive parts to be transported to and from the automotive industry in and around Bratislava and to the GM plant.

In Aspern a ring road is planned with trams serving the centre north of the GM plant. For recreation a huge four-hectare artificial lake will be built. Geothermal energy will be obtained from two hot springs, which will also provide heat. Contracts with Fernwärme Wien will be signed shortly. One of the springs is around 3 km underground and has a temperature of 120 degrees Celsius. The other is 5 km below ground and is over 200 degrees. Electrical power could also be generated using turbines, but this option is still being studied.

View Larger Map

A total of 8,500 dwellings are to be built on the northern perimeter of Vienna and new companies could create jobs for up to 25,000 people. The investment in the new district by the City of Vienna is being put at around 5 billion euros.

The master plan should be approved this year by the City Council following consideration of comments by the local population. In 2008 a new land utilisation plan will be drawn up. In 2009 the first companies will settle in Neu-Aspern and a year later the first dwellings will be completed. In 2012 the extension of the U2 will be available, but according to Asfinag the extension of the A23, the south-east city bypass, could be delayed until 2015.

The crisis explained

how the crisis will affect everyone and who created it.

Happily in Slovakia the value of all mortgage loand is only 17% of Slovak GDP
in the UK its well over 350% of UK GDP

The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

Nobel winner Joseph Stiglitz discusses which flavour of capitalism will survive

is the free market rhetoric dead? this is an interesting discussion as to what we are to expect next in the world economy, and he also provides an excellent explanation of American capitalism for the last 15 years as a corporatocracy, or socialism for big corporations only.