A systemic crisis in the euro area would have serious repercussions on a global level, deepening the cycle started in 2008-2009. But the consequences for the new member states from central and eastern and south-eastern Europe and the candidate countries of the latter area would be even more dramatic, given the strong economic and financial integration with euro-area.

The EU-10 or Eastern Europe, to say the new member states since 2004 (except Cyprus and Malta) and since by 2007 should be record a significant slowdown during 2012 (heralded by a general slowdown in the third quarter of 2011) more pronounced in Hungary , Czech Republic and Slovakia; it is due to the weakness of foreign demand and the deterioration of investment demand. The Baltic States seem best positioned at this time, although the deceleration of growth will still be significant for them. If you consider the fact that private and public consumption is stagnant if not shrinking since 2009, due to both high and stable levels of unemployment and restrictive fiscal policies needed to reduce deficits and public debt, this makes the  exposure of this group of countries even more risky facing a possible systemic crisis in the euro area, the main source of credit and financing for them. Since the middle of this year there has been a quite emblematic phenomenon as euro area membership began to be perceived as a factor of risky and not of creditworthiness, as evidenced by the increased gap between the Slovakia(euro area’s member)  CDSs and Czech Republic CDSs, the latter more than 130 basis points lower.

The Poland itself, where growth rates and size of the internal market can be considered the stronger of the Eastern EU, cannot be considered immune due primarily to a significant proportion of euro-denominated loans on total loans (35 %), while among the accession countries Croatia seems to be particularly vulnerable for at least three factors (Debt/GDP ratio above 100%; 76% of loans denominated in foreign currency; 90% of the banking system assets are foreign-owned).

In this perspective, it should be noted that the Crisis Observatory analyzes (http://www.osservatoriocrisi.it/), Informest initiative - funded by the Friuli Venezia Giulia - for the monitoring of the economies of Eastern EU and Western Balkans , emerged some "critical" structural nodes. The economic and financial integration with the EU-15 (the so-called "old states") formed in two decades of political relations, trade and investment that have reshaped Eastern EU economic structure, makes it utterly exposed to EU-15 economic trend. The banking sector particularly remains with 75% of its assets in the hands of Austrians, Italians, Swedes (Baltics) and Greek (Romania and Bulgaria) banks. When in 2008-2009 the contraction in global demand and the devaluation of national currencies made ??it difficult for families and businesses in these countries to honor debts and mortgages in euros and other currencies, the real crisis had also become a credit crunch. The intervention of international institutions, ECB and western European banks had allowed the refinancing of the eastern branches.


Ranges of estimates and projections of GDP growth for the 2011-2013 period





Euro area




Eastern EU




Western Balkans




United States




OCDE countries












Source: BMI, EIU, OCDE


In 2012 the euro area is likely to record a recession as the global economy remains highly vulnerable to a further deterioration of the situation in the euro area. The escalation of the sustainability crisis on sovereign debts in the euro area by means of contagion effects with a series of cascade defaults on debt servicing could disrupt financial markets and the global economy in an even more acute than the 2008 crisis -2009; the effects for the EU Eastern Europe would be very heavy.

The main mechanisms of transmission would be the direct financial transactions and foreign trade and the maximum exposure would be located in the EU Eastern Europe, as the share of exports to the euro area compared to the total exports is more than 50% in countries like the Czech Republic, Poland and Romania. These countries, despite the development of the domestic components of growth, remain largely dependent on exports. With regard to financial flows, it should be noted that already in the last quarter of this year warning signs have multiplied: i) the agreement in the euro area for higher capital ratios equivalent to 100 billion Euros to be recovered by credit institutions; ii) the sale of some eastern branches by Belgian and Portuguese banks; iii) the directive in late November by the Austrian Central Bank to limit the loan to the EU's eastern branches.

A deepening of the crisis in the euro would result in a further strong deterioration of the recessive cycle not only in Europe  but at global level. Besides the immediate fallout on exports and investment, it would force the EU-15  banks to strengthen the balance sheet, bringing "back home" the capital and interrupting the Eastern EU’s (and the Western Balkans )subsidiaries financing and / or trying to sell the same branches. This would trigger a second phase of credit crunch, this time a lasting one, sinking the real sector and putting the banking systems of these countries into chaos .


Exposure of the euro area EU-10 (Eastern EU) and some countries (Index as% of GDP)

























Source: EBRD

It should be added that the other emerging economies and non-EU developed countries are not immune from a potential systemic crisis of the Euro area, due to the contraction in the global trade. Primarily the United States, should record a confidence collapse of businesses and consumers. In fact, in terms of share of exports from the euro area to total exports, Russia and Turkey stood at 35%, 18% Brazil, India and China to 15% (signifying a significant exposure also for BRIC), the United States to about 14%. With regard to the financial flows, in addition to the effects of global depression, a group of countries directly exposed to a fall in lending capacity of European banks would be that of emerging Asia that would also see, like other areas with a strong presence in emerging economies, a contraction in the value of its international activities.

(Prepared by the Analysis Group of Informest)

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