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Financial Crisis in Eastern Europe - Road to Recovery
Jens Jungmann, Bernd Sagemann
Verlag Gabler Verlag, 2011
ISBN 9783834965530 , 619 Seiten
Format PDF, OL
Kopierschutz Wasserzeichen
Foreword
6
Preface
8
Overview
9
List of Abbreviations
11
The World Financial Crisis
19
The Great Subprime Credit Crisisand its Impact on Eastern Europe
20
1. Introduction
21
2. The Great Subprime CreditCrisis and its Global Impact
22
2.1. The Causes of the Subprime Credit Crisis
23
2.1.1. Politicians Assisted in Creating the Subprime Monster
24
2.1.2. Central Banks Fuelled the Crisis
27
2.1.3. The Necessary Toolset
30
2.1.4. The Case of AIG
38
2.1.5. The Monolines
40
2.1.6. The Low Interest Rate Environment and the Demandfor Higher Yield
42
2.1.7. The Need to Deleverage
44
2.1.8. The Fiction of the Strong US Borrower and PredatoryLending Practices
45
2.1.9. The Rating Agencies Were Driving through theRear-view Mirror
46
2.1.10. The Markowitz Hypothesis
50
2.1.11. Moral Hazard in the Financial System
51
2.2. How the Subprime Crisis Developed to aGlobal Credit Crunch
54
2.2.1. The Magnitude of the Credit Crisis
54
2.2.2. How the Crisis in Subprime Debt Infected Other Markets
55
2.2.3. Hedge Funds and other Near-Banks
56
3. The Impact of the Subprime CreditCrisis in Eastern Europe
58
3.1. The Rise and Fall of the Countries inthe Region
58
3.2. The Role of the Government to Fight Backthe Crisis
60
Specific Areas of Crisisin Eastern Europe
62
Bulgaria:The Deferred Crisis
63
1. Situation before the Crisis
64
1.1. Retrospective Overview
64
1.1.1. The Decade of Downfall post 1989
64
1.1.2. The Boom Decade
65
1.2. Financial Status of the Private Sector
67
1.3. Financial Status of the Public Sector
71
1.4. Development Status of the Real Economy
73
1.4.1. Development Status of the Bank Sector
73
1.4.2. Development Status of Other Sectors
75
2. The Impact of the World Financial Crisis(2008/2009/2010)
76
2.1. Outline of the Expansion of the Crisis inBulgaria
77
2.2. Domestic Impact
79
2.2.1. Private Sector Recession
79
2.2.2. Governmental Involvement
84
2.3. Foreign Impact
85
3. Challenges and Coping with theFinancial Crisis
90
3.1. Fiscal Measures
90
3.2. Macroeconomic Stimulation Measures
98
4. Outlook for the Coming Years
100
4.1. Pro-cyclical and Anti-cyclical Effects
100
4.2. Fiscal Prospects
101
4.3. Prospects for the Real Economy
102
Czech Republic:Crisis Postponed – Navigation toRecovery
106
1. Situation before the Crisis
107
1.1. Methodology
109
1.2. Economic Development
109
1.2.1. The Lean Years of Economic Transformation
109
1.2.2. The Fat Years Before the Crisis
111
1.2.3. Bountiful Years Just Before the Crisis
119
2. The Impact of the World Financial Crisis(2008/2009/2010)
125
2.1. Economic Development in 2008, 2009 and2010
125
2.1.1. So Far So Good – Year 2008 and the Onset of Global Crisis
125
2.1.2. 2009 – The First Year of Crisis
129
2.1.3. Development in the First Quarter of 2010
135
2.2. Banking and Financial Crisis in the CzechRepublic
137
2.2.1. Development of Czech Banking System
137
2.2.2. Interest Rate Development
141
2.2.3. Credit Availability
143
2.2.4. Czech Currency Development
144
2.2.5. Maastricht Criteria
145
2.2.6. Stock Market Developments
147
2.3. Mortgage Lending Crisis in the Crisis
148
2.3.1. Mortgage Loans in the Czech Republic
149
2.3.2. Mortgage Market Evolution from 1995 to 2007
149
2.3.3. Impact of the Crisis on the Mortgage Market and LatestDevelopments
150
3. Challenges and Coping the FinancialCrisis
153
3.1. Anti-crisis Measures in the Czech Republic
153
3.2. Political Landscape of the CR during theEconomic Crisis
154
3.3. Summary and Comments on SelectedAnti-crisis Measures
156
3.4. Anti-Crisis Measures in Government EconomicPolicy
158
3.4.1. Anti-Crisis Measures Adopted by Previous Government
158
3.4.2. Existing Anti-Crisis Measures
160
3.5. Pension Reform and the Crisis
167
3.6. Other Crisis Exit Options – Nerv
168
3.7. Conclusions, Challenges and the Lessonsdrawn from the Economic Crisis
169
4. Outlook for the Coming Years
170
Hungary:A Country Hit Hard
173
1. Situation before the Crisis
174
1.1. Recent Historical Developments andtheir Effects on the Economy
174
1.2. Political Situation – A Prime Minister “UnderPressure”
180
1.3. Economic Situation
181
1.3.1. State Budget Deficit
181
1.3.2. Inflation
184
1.3.3. GDP growth
185
1.3.4. Foreign Direct Investment (FDI)
186
1.3.5. Unemployment Rate
187
1.3.6. Exchange Rate Development vis-à-vis the Euro
189
1.3.7. Social Situation – Demonstrations Against the Government
190
1.3.8. First Signs of a Crisis
191
2. The Impact of the World Financial Crisis(2008/2009/2010)
191
2.1. The Year 2008
191
2.1.1. Political Situation – Missing Awareness of the Crisis’ Depth
191
2.1.2. Economic Situation – High Deficit and the Hungarian Forint“Under Attack”
192
2.1.3. Social Situation
202
2.2. The Year 2009
203
2.2.1. Political Situation – New PM with Dwindling Support forStrict Austerity Measures
203
2.2.2. Economical Situation
205
2.2.3. Social Situation – People Angry about Corruption Scandals
220
2.3. The Year 2010 – Current Situation
224
2.3.1. Political Situation – New Confidence among Politicians /No Comparison to Greece
224
2.3.2. Economical Situation – First Signs of a Slight Recovery?
226
2.3.3. Social Situation – Positive Aspects out of the Crisis?
235
3. Challenges and Coping with theFinancial Crisis
237
3.1. Economic Policy Objectives
237
3.2. Characteristics of the IMF/EU rescuepackage 2008
238
3.3. Major Endeavours and Measures in2008/2009/2010 to Fight the NegativeImpacts of the Crisis
241
3.3.1. Employment Policy
241
3.3.2. Major State Aids and Private Investment Projectsin Hungary
243
3.3.3. Measures in 2010 Budget According to the Updated ConvergenceProgramme of Hungary for 2009-2012
244
4. Outlook for the Coming Years
245
Lithuania:The Return of Opportunities
253
1. Situation before the Crisis
254
1.1. Lithuania’s Journey into the Global Economyfrom 1991 to 1999
254
1.2. The Preparations for Entry to the EU –From 2000 to 2004
255
1.3. Development of Selected Economic Sectorsfrom 2004 Onwards
257
1.3.1. The Property Sector and Construction Industry
257
1.3.2. Foreign Trade
258
1.3.3. Banking Industry and Bank Lending
259
1.3.4. Industry
260
1.4. Economic Overview
261
1.4.1. GDP and the Rate of Inflation
261
1.4.2. Public Finances
262
1.5. Fiscal Situation
263
1.5.1. Corporation Tax
263
1.5.2. Income Tax
263
1.5.3. Value Added Tax
264
1.5.4. Other taxes
264
1.6. Labour and Social Policy in the Boom Years
264
1.6.1. Wage Costs
264
1.6.2. Unemployment Figures
265
1.6.3. Social Security
266
2. The Impact of the World Financial Crisis(2008/2009/2010)
268
2.1. Selected Economic Sectors
268
2.1.1. The Property Sector and Construction Industry
268
2.1.2. Foreign Trade
269
2.1.3. Banking Industry and Bank Lending
270
2.1.4. Industry and the Domestic Market
270
2.2. Economic Overview
271
2.2.1. GDP and the Rate of Inflation
271
2.2.2. Public Finances
272
2.3. Employment and Social Affairs
273
2.3.1. Wage Costs
273
2.3.2. Job Market
274
2.3.3. Child and Youth Poverty
274
3. Challenges and Coping with theFinancial Crisis
275
3.1. Challenges of the Financial Crisis
275
3.1.1. Pegged Exchange Rates
275
3.1.2. Inflation
276
3.1.3. Job Market
276
3.1.4. Migration
278
3.1.5. Banking System
280
3.1.6. Insolvencies
281
3.1.7. Downrating from Credit Rating Agencies
282
3.2. Challenges of the Financial Crisis
283
3.2.1. Job Market
283
3.2.2. Taxation
283
3.2.3. Social Security Insurance
286
3.2.4. Law
290
3.2.5. Further Measures
293
4. Outlook for the Coming Years
303
4.1. Accession to the Monetary Union
303
4.2. Current Economic Data and Forecasts
303
4.3. Developments and the Outlook for IndividualIndustries
306
4.4. Conclusion
308
Poland:(Po)Land of Opportunity
311
1. Situation before the Crisis
312
1.1. Poland – Location, Political System
312
1.2. Economic Situation of Poland before theFinancial Crisis
313
1.2.1. Construction
315
1.2.2. Trade
318
1.2.3. Industry
322
1.3. Financial Situation in Poland
325
1.4. Labour Market
325
2. The Impact of the World Financial Crisis(2008/2009/2010)
328
2.1. Macroeconomic Consequences of theEconomic Crisis in Poland
328
2.1.1. Construction
330
2.1.2. Trade
334
2.1.3. Industry
340
2.2. Economic Crisis and the Financial Situation inPoland in the Years 2008-2010
344
2.3. Labour Market
345
3. Challenges and Coping with theFinancial Crisis
347
3.1. Rescue Package for the EU Economy
348
3.2. Actions of the Polish Government toCounteract the Consequences of theEconomic Crisis
349
3.2.1. Government’s Anti-Crisis Plan
349
3.2.2. Anti-Crisis Package
352
3.2.3. State Aid in Repayment of Housing Loans
359
3.3. Counteracting the Crisis in Poland
361
3.3.1. Actions of the National Bank of Poland and the MonetaryPolicy Council
361
3.3.2. Actions of the Financial Supervision Authority
363
4. Outlook for the Coming Years
365
4.1. ‘Polska 2030 – Wyzwania rozwojowe’ Report
365
4.2. Euro 2012 – European Football Championship
367
4.3. Investment Attractiveness of Poland
368
4.4. Polish Presidency of the Council of theEuropean Union – 2011
370
4.5. Europe 2020: New Economic Strategy forEurope as an Opportunity for Poland?
371
Romania:Politics do matter
372
1. Situation before the Crisis1
373
1.1. Country Profile
373
1.2. The Lost Decade 1990-2000
375
1.3. Economic Growth and Social Change
376
1.3.1. The Turn-Around 2000-2004
376
1.3.2. Accession boost and growing imbalances 2005-2008
378
2. The Impact of the World Financial Crisis(2008/2009/2010)
382
2.1. Crisis – Sudden and Fierce
382
2.2. Structural Problems Revealed
384
3. Challenges and Coping with theFinancial Crisis
386
3.1. Late Recognition and Shiftless Reactions
386
3.2. Politics under Supervision: Romaniaand the IMF
388
4. Outlook for the Coming Years
392
4.1. Short Term: Recovery – Visible but Fragile
392
4.2. Long Term Perspectives
403
Russian Federation:The Rocky Road
408
1. Situation before the Crisis
409
1.1. Russia’s Economy Rising
410
1.1.1. Transformation to Capitalism – Breaking down the SovietSystem
412
1.1.2. Structure Changes and Free Capacity
413
1.1.3. Energy Sector
414
1.1.4. Putin’s Reforms
415
1.2. Overdependence on Oil and Gas
417
1.3. Financial Situation
419
1.3.1. The Banking System Vulnerabilities are Rising
421
1.4. Did the Growth Decade of 1999-2008 Benefitthe Average Russian?
421
1.4.1. Domestic Credit
423
2. The Impact of the World Financial Crisis(2008/2009/2010)
424
2.1. General Impact
424
2.2. Russian Specifics
425
2.3. Impact of Crisis Policies
431
3. Challenges and Coping the FinancialCrisis in Russia
435
3.1. Monetary and Exchange Rate Policies
436
3.2. Fiscal Policies to Preserve Social Peace, notInfrastructure
441
3.3. Structural Weaknesses, uneven GeographicalImpact
448
4. Outlook for the Coming Years
454
4.1. Investment in Oil
456
4.2. GDP
458
4.3. Fiscal Debt
460
4.4. Labour Markets
461
4.5. Population and Immigration
462
Serbia:Serial Tensions amidst Recovery
465
1. Situation before the Crisis
466
1.1. Political and Historical Turmoil
466
1.2. Recovering Years before the Crisis
467
1.2.1. Economic Situation
467
1.2.2. Financial Situation
475
1.3. Having Broken the Back on the Growth Path?
479
2. The Impact of the World Financial Crisis(2008/2009/2010)
481
2.1. Contamination of Serbia
481
2.2. Economic Crisis
481
2.2.1. Macroeconomic Developments
481
2.2.2. Balance of Payments and Trade
482
2.2.3. Foreign Direct Investment
483
2.2.4. Labour Market Flows
484
2.3. Financial Crisis
486
2.3.1. Attempt to the Financial Sector
486
2.3.2. The Serbian Dinar – Implications for a Currency Crisis
490
2.3.3. Financial Positioning
492
3. Challenges and Coping with theFinancial Crisis
493
3.1. Serbia on the Tightrope Walk
493
3.2. Financial Aid from the IMF
494
3.3. Contribution from the European Economy
495
3.3.1. European Union
495
3.3.2. European Investment Bank
496
3.3.3. European Bank for Reconstruction and Development
497
3.4. Anti-crisis Measures by the Government andthe Policy Response to the Crisis
497
3.4.1. Financial Sector Policy
498
3.4.2. Governmental package of measures
500
3.5. Further Assistance by the World Bank
506
4. Outlook for the Coming Years
507
4.1. Potential for Serbia as an EU Member State
507
4.2. Navigating Challenges Ahead – Outlook 2015
508
Slovakia:Small Land of Big Changes
511
1. Situation before the Crisis
512
1.1. Political and Economic Background of theSlovak Republic before the Global Crisis
512
1.2. Democratic Forces Gain Political Power afterParliamentary Elections in 1998 – PositiveTurnaround in among others Economic Policy
517
1.3. Period 2002-2007:Slovakia – Economic Tiger in CEE Area
519
1.4. Euro Adoption in Slovak Republic
524
2. The Impact of the World Financial Crisis(2008/2009/2010)
528
2.1. End of 2008 – First Signs of Crisis in Slovakia –only a Slow-down of Growth?
528
2.2. Beginning of 2009 – the Negative Impact ofthe Crisis Exceeds even the Most PessimisticScenarios
529
2.3. Banking Sector
532
2.3.1. Banking Sector before the Onset of Crisis
532
2.3.2. Banking Sector at the Time of the World Crisis
535
2.4. Labour Market
539
2.4.1. Development of the Enemployment Rate During Crisis
539
2.4.2. Development of Average Wage During Crisis
541
2.5. Development on the Real Estate Marketand in the Area of Mortgage Loans(Mortgage Banking)
542
2.5.1. Real Estate and its Development
542
2.5.2. Mortgage Financing in Slovakia – Fast Growth before theCrisis and Swift Reactions to the Immediate Situation atthe Time of Economic Crisis
546
3. Challenges and Coping with theFinancial Crisis
550
3.1. Measures Concerning Finances and Economy
551
3.1.1. Stabilization Aid for Banks
557
3.1.2. The Program of Providing Help to Citizens who areDefaulting on Housing Loans
557
3.2. Measures Concerning Business
558
3.3. Measures Concerning Employment
558
3.3.1. New contributions in order to preserve existing jobs andcreate new employment
558
3.3.2. Contribution for the Graduate Practice
559
3.3.3. Contribution for Self-Employment
560
3.3.4. Public finances
561
3.3.5. Business Environment
562
3.3.6. Investments and..Regional Development
563
3.4. Regional Differences and their Elimination –Even a Bigger Challenge after the Impact ofthe Global Crisis
563
3.4.1. Regional Differences in Unemployment and..AverageWages during the Crisis
564
3.4.2. Real Estate
566
4. Outlook for the Coming Years
568
Ukraine:Impact and Recovery from the Crisis
575
1. Situation before the Crisis
576
1.1. Economic Environment in Ukraine
576
1.2. Political Instability and Tax Burden
578
1.3. Conclusions
579
2. The Impact of the World Financial Crisis(2008/2009/2010)
580
2.1. Consequences of the Financial Crisis on theUkrainian Economy
580
2.2. Banking Sector Developments in the Ukraineduring the Economic Crisis
583
2.3. The Deep Fall of the Ukrainian ConstructionIndustry
586
2.4. Measures to Overcome the Economic Crisis
588
3. Challenges and Coping with theFinancial Crisis
592
3.1. Anti-Crisis Measures in Banking and FinanceSectors
593
3.1.1. Prevention of pre-term Deposits Repayment
593
3.1.2. Lending Activity
594
3.1.3. Refinancing of Banks
595
3.1.4. Recapitalization of Banks
596
3.1.5. Currency Regulation
597
3.2. Anti-Crisis Measures in Housing ConstructionSector
599
3.3. Crisis Related Alteration to Foreign InvestmentRegime
599
3.4. Anti-Crisis measures in Labour Market
600
3.5. Anti-Crisis alteration of Tax and CustomsLegislation
601
4. Outlook for the Coming Years
602
4.1. Defining Potential
602
4.2. Renewable Energy Opening Up New Fields forInvestments?
603
4.3. Boosting of Investments and Integrating withthe European Community due to HostingUEFA EUR 2012?
605
4.4. Obtaining the IMF Loan to Deal with LocalReforms and External Market Risks?
607
4.5. Increasing other Institutional and CommercialBorrowing?
607
4.6. Export of Steel and Grain Still Key Factors ofBoosting Ukraine’s Economy?
608
4.7. Force of Mergers and Acquisitions,Cooperation and Privatization Coming Back?
610
4.8. Modelling New Tax Code and Paying off VATRefund?
611
4.9. Banks on Earning Road Again?
612
4.10. Hryvna Exchange Rate Getting Floating toPower Inflation?
613
4.11. Consumers Supporting the Economy?
614
4.12. Conclusion
614
Epilogue
615
Financial Crisis in Eastern Europe:Road to Recovery
616
Editors` Vita
623
Authors` Vita
625