* Three global aid banks launch 25 bln eur for E.Europe
* Hungary says EU should lead 180 bln eur bailout
* FX still pressed as mkt doubts package enough
By Carolyn Cohnand Lesley Wroughton
LONDON/WASHINGTON, Feb 27 (Reuters) - Three development
banks launched a 24.5 billion euro loan programme on Friday for
central and Eastern European banks and firms, but officials said
the region could need more than 10 times that to avoid a crisis.
The announcement came ahead of a European Union summit on
Sunday at which Hungary will propose a 180 billion euro ($228.2
billion) aid package to leaders who are hoping to bridge
differences hindering unified action on the financial crisis.
The World Bank, European Bank for Reconstruction and
Development (EBRD) and European Investment Bank (EIB) said the
two-year loan plan will provide quick, large-scale financing to
banks and ensure smaller companies would not be shut off from
capital.
That gave a lift to the region's battered currencies, but
they soon retreated as markets judged there was not that much
new money in the deal compared to the funds already announced
and the kind of financing needed to keep growth going.
"(It) sounds like a lot of money, but when (commercial)
banks have lent Eastern Europe about 1.7 trillion dollars, 25
billion is peanuts," said Nigel Rendell, emerging markets
strategist at Royal Bank of Canada in London.
"Ultimately we will have to get a much bigger package and a
coordinated response from the IMF, the European Union and maybe
the G7."
Concerns centre around some countries' reliance on external
borrowing and that the region's largely foreign-owned banks
could shut off lending due to the global credit crunch and their
need for money at home.
The package is the development banks' contribution to EU
efforts to help the region, which has seen some of the bloc's
newer members seek emergency funding from the International
Monetary Fund.
EBRD President Thomas Mirow told French newspaper Le Figaro
that eastern European banks could need some $150 billion in
recapitalisation and $200 billion in refinancing to stave off
the risk of a banking failure in the region. []
"The institutions are working together to find practical,
efficient and timely solutions to the crisis in eastern Europe,"
Mirow said earlier in a statement.
"The deep integration of the banking sector across Europe
has proven to be one of the crucial drivers in forging the
economic unity of the region," he said.
Ratings agency Standard & Poor's said the package was good
news but added it would have no direct sovereign ratings
impacts, and warned of persistent risks in the region.
Czech central bank board member Eva Zamrazilova said it
would help smaller companies caught in the credit crunch.
"Such a plan could help to overcome the current confidence
crisis," she told Reuters [].
EU BILLIONS
Some member states are seeking to discuss a proposal for a
"platform" to help eastern European economies and their banks at
the weekend EU summit with a range of aid options.
Hungarian Prime Minister Ference Gyurcsany said he would
present a the 180 billion euro ($228.2 billion) package for
eastern Europe, up from an earlier figure of 100 billion
[].
Philippe Maystadt, president of the European Investment
Bank, the EU's long-term lending bank, said the development
package announced on Friday could be seen as a first step.
"You can reasonably infer that this (package) could be the
first part of a more global answer from the European Union," he
told Reuters in an interview [].
The IMF welcomed the development banks' announcement, and
said it would continue to support regional economies on a
macroeconomic level. []
A massive expansion of international banks into eastern
Europe has made the region's banking system vulnerable to credit
strains that arose from the U.S.-led housing collapse that
spread into Western Europe.
Austrian banks, which have been particularly exposed to the
region, could withstand worst-case loss scenarios by using
existing capital cushions and drawing on the government's bank
rescue package, the Austrian central bank said. []
Under the development bank 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.
(Additional reporting by Sebastian Tong and Martina Fuchs;
editing by Patrick Graham)
