Pressure builds on CEE policy mix

Popular demands to see the rewards of transition

  • By Philip Alexander
  • 19 May 2007
Email a colleague
Request a PDF

Breakneck growth rates across post-transition economies are ushering in new risks for the region that can only be properly tackled by a redoubling of political will. This is the message of the EBRD’s transition report update unveiled today.

Although many countries across the CEE region are on the verge of graduating from EBRD programmes as market economies become entrenched, the downside of their rapid growth is becoming increasingly apparent, the report argues.

“Many of the problems that countries are facing are associated with this fast growth, such as the overheating and the distribution issues: people are feeling that growth is not benefiting everybody. When people have gone through major sacrifices, once the economy starts growing, you want to give them their compensation,” Erik Berglof, the bank’s chief economist, told Emerging Markets.

The rise of consumers is also the key theme for a presentation today by Debora Revoltella, the CEE chief economist for Unicredit, which is now one of the largest players in the region’s retail banking market. She cautioned against assuming that the catch-up process in incomes and living standards is going too fast.

“We have some concerns about high lending growth, but in Bulgaria for instance, we see that much of the rise in external debt is in the corporate sector, related to high levels of FDI. In the household sector, net savings are still rising,” Revoltella told Emerging Markets.

She is more concerned about the decline in policy momentum following EU accession, observing that aside from Hungary, which embarked on a severe fiscal correction in 2006, many other governments are “just lucky” that high growth rates are helping public finances stay on track.

“We do not see Poland, for example, joining the Eurozone before 2012, but this is mainly a political decision not an economic decision. We think they could converge to the 3% Maastricht target much earlier, but at this moment, they are not tackling the fiscal performance or long-term structural issues,” she said.

Berglof agreed that other eastern European states are not yet confronting these challenges in the way that Hungary was obliged to last year. “I wish there was some more learning across countries,” he told Emerging Markets.

“In the lead-up to accession, there were lots of pressures on these countries from the outside. Once you enter, the pressure is not as strong, and that does create some problems, for instance in public sector procurement and investment, and competition policy.”

However, Berglof distinguished between a slowdown in policy momentum and an outright reversal of transition. “It is not about reform now, it is more about making difficult decisions on fiscal discipline. The growth is entrenched.”

On that note, Berglof emphasized that part of the graduation process means the EU will need to pick up the baton from the EBRD to set the policy tone for the region.

  • By Philip Alexander
  • 19 May 2007

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Citi 313,852.39 1175 8.95%
2 JPMorgan 286,674.13 1305 8.17%
3 Bank of America Merrill Lynch 281,869.72 974 8.04%
4 Goldman Sachs 214,547.99 704 6.12%
5 Barclays 205,147.76 790 5.85%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Deutsche Bank 31,971.88 102 6.87%
2 HSBC 31,940.18 140 6.87%
3 Bank of America Merrill Lynch 29,065.55 82 6.25%
4 BNP Paribas 24,679.63 135 5.30%
5 SG Corporate & Investment Banking 22,195.55 122 4.77%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 JPMorgan 14,960.44 66 7.87%
2 Morgan Stanley 13,992.90 72 7.37%
3 Citi 13,566.56 83 7.14%
4 UBS 13,028.25 52 6.86%
5 Goldman Sachs 11,994.74 65 6.31%