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Back to the IMF? Hungary under siege by creditors

A new round of crisis in Eastern Europe

Eastern European states are in for a new round of the crisis. The external control of the banking sector and high reliance on external credit has landed the countries of Eastern Europe in a vulnerable position. Now, credit flows from Western banks are drying up again. Hungary has been the first country in the region to ask for IMF support again, Joachim Becker reports.

Western European banks experience increasing problems to refinance their activities and they face higher capital requirements. In addition, they start to pay the bill for their past lending policies. Lending used to expand very rapidly in the pre-crisis years. Lending of the local daughters of Western parent banks often exceeded deposits in a significant way. For example, it is reported that the credit/deposit ratio of the Austrian Erste Bank was about 200% in Hungary, 150% in Croatia and 140% in Romania. For Raiffeisen, this ratio amounted to 150% in Ukraine and 130% in Romania ...

Find in this article:

	Risky undertakings before the crisis
	More restrictive lending now
	Budapest under pressure
	Box: IMF offers help but with conditions

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Back to the IMF? Hungary under siege by creditors
Eastern European states are in for a new round of the crisis. The external control of the banking sector and high reliance on external credit has landed the countries of Eastern Europe in a vulnerable position. Now, credit flows from Western banks are drying up again. Hungary has been the first country in the region to ask for IMF support again.