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By Huw Jones
BRUSSELS, Nov 4 (Reuters) - Several countries in eastern
Europe are certain to hit recession and the rest face tough
times as banking credit seizes up, the head of the European Bank
for Reconstruction and Development said on Tuesday.
A day after the European Commission predicted Estonia,
Latvia and Lithuania would plunge into recession, and slashed
its growth forecasts for Poland, the Czech Republic and
Slovakia, the EBRD chief said difficult times lay ahead.
"As a consequence of the financial crisis, it is now clear
that much of the region faces major challenges and recession in
a number of countries is already certain," Thomas Mirow told the
European Parliament.
The Commission expects Poland, the Czech Republic and
Slovakia to weather the global financial crisis relatively well
and sees their economies continuing to expand next year and in
2010 at a healthy pace compared with the euro zone.
By contrast, EU member Hungary has already said it expects
its economy to contract 1.0 percent next year.
Budapest has already needed a $25.1 billion International
Monetary Fund-led rescue package and Mirow dismissed criticisms
the bank should have played a major role.
"This is three times the business volume of the EBRD and we
are engaged in 30 countries," Mirow told parliament's economic
affairs committee.
"We should rather look at the EBRD as an institution that is
working structurally, trying to help in this situation of
crisis, but we are clearly not a lender or investor of last
resort," Mirow said.
Writedowns on investments due to the financial market crisis
were set to total about two billion euros this year but would
not affect the bank's ability to lend in 2009.
The EBRD expected to make a loss in 2008 for the first time
in a decade, Mirow said.
"If we want to implement projects where we are providing
credit, then we have significant difficulties to win over the
private banking sector for the credit we need in whatever
project this may be," he said.
"For six to eight weeks now since the collapse of Lehman
Brothers, the banking market in eastern Europe is basically
closed for business," Mirow said.
Mirow said the packages introduced by governments in western
EU countries to shore up banks should take account of the
effects on east European subsidiaries of those banks.
"What can we do to avoid parent banks doing what
Anglo-Saxons call cashing in?" Mirow said.
"We spoke very promptly to those in charge and we gather...
this was very limited. There are some banks in the region who
have parent banks in Austria, Italy and France and they are
receiving the resources that they require," Mirow said.
The EBRD was set up in 1991 to help former Soviet-dominated
economies in central and eastern Europe, often through lending
to or taking stakes in small and medium-sized enterprises.
Mirow sought to dampen expectations of a merger between the
EBRD and the European Investment Bank, the EU's lending arm.
"I never say a debate is futile but I would say it's not
exactly topical now," Mirow said.
"That is because major non-European shareholders in the bank
-- the United States, Japan, Russia -- they want to continue
with their commitment to the EBRD and I certainly encourage them
wholeheartedly," Mirow said.
(Reporting by Huw Jones, editing by Jeremy Smith, David Stamp,
Swaha Pattanaik)
