(Repeating story to additional subscribers)
By Lesley Wroughton
WASHINGTON, Feb 26 (Reuters) - Global development banks on
Thursday launched a coordinated two-year plan to lend up to 25
billion euros ($31.7 billion) to shore up banks and businesses
in crisis-hit eastern and central Europe.
The action plan by the World Bank, the European Bank for
Reconstruction and Development (EBRD) and European Investment
Bank (EIB) comes as European Union members prepare to discuss
aid to banks at an emergency summit on Sunday.
In a communique obtained by Reuters, the lenders said they
would provide quick, large-scale financing to strengthen banks
and ensure domestic companies, especially small and medium
enterprises, get access to capital.
In addition, the lenders will mobilize other resources for
the region through their lending and guarantees, and work with
Western parent banks that have promised support for their
struggling subsidiaries in the region.
Massive expansion of international banks into eastern Europe
made the region's banking system vulnerable to credit strains
that arose from the U.S.-led housing collapse that spread into
Western Europe.
The plan will officially be announced on Friday.
The lenders said their aid will be in the form of equity and
debt finance, credit lines and political risk guarantees.
Under the plan, the EBRD will provide up to 6 billion euros
this year and next to the region's financial sector and will
include trade finance through banks.
The EIB said it will lend 11 billion euros to businesses in
central, eastern and southern Europe, of which 5.7 billion euros
is ready to be disbursed, and a further 2.8 billion euros should
be approved by the end of April.
The Washington-based World Bank said it intends to propose
lending and political risk guarantees of up to 7.5 billion euros
for banks, infrastructure projects and trade financing.
MORE COORDINATION
World Bank President Robert Zoellick has urged the EU to do
more to support central and eastern Europe to ensure that the
region's progress to market economies were not set back by an
economic crisis..
"... as someone who was involved with the events at the end
of the Cold War in 1989, it would certainly be a political and
human tragedy if you saw the reuniting of Europe from 20 years
ago come to a crisis now," Zoellick said on Monday.
In a letter to Zoellick on Thursday, EU Monetary Affairs
Commissioner Joaquin Almunia sought to dispel fears the bloc was
not doing enough for its poorer eastern neighbors and detailed
EU aid schemes to the region.
The big EU member states have adopted economic stimulus
packages and national rescue plans for their banks with litte
coordination for the eastern European newcomers, which have seen
capital drained from their financial system.
The lenders said national policy responses were necessary
but may not be enough to contain the crisis and maintain lending
to the real economy.
"A coordinated, regional approach is required because
national policy packages can have effects beyond national
boundaries, and because support and stimulus packages compete
for a limited pool of resources," they added.
The development banks said they were also working with the
International Monetary Fund which has approved $50 billion in
emergency packages for Iceland, Hungary, Latvia, Ukraine, Serbia
and Belarus in recent months.
The lenders said it was important to coordinate efforts not
only among themselves but also across Europe to stabilize the
region and ensure adequate funding levels.
(Editing by Kazunori Takada)
