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frostyboy
04-03-2009, 07:00 PM
http://finance.yahoo.com/q/bc?t=2y&s=EURPLN%3DX&l=on&z=m&q=l&c=eurpln%3Dx%2Ceurnzd%3Dx%2Ceurhuf%3Dx%2Ceurron%3D x%2Ceurisk%3Dx%2Ceurisk%2Ceurisk%3Dx

from the above the nzd looks like it is weeker than than eastern europe. i am going on holiday to eastern europe for some months in a couple of months. would like to postpone it for when the nzd is the strongest. but who knows if eastern europe as the article says will go through the eye of the storm

http://www.manilatimes.net/national/2009/march/04/yehey/opinion/20090304opi7.html

Eastern Europe may become
eye of second financial storm


The financial and economic situation is worsening in Eastern Europe, where bank risks, withdrawal of foreign capital, plummeting exports and devaluation of currencies, seemingly threaten a new financial storm.

In hindsight, the woes have been long-rooted because of Eastern Europe’s high dependence on foreign capital, exports and heavy foreign debts.

In the first few years after the EU’s expansion, Eastern Europe moved onto the express road of economic development. With robust economic growth, the thriving new economies attracted swarms of investors from Western European banks, thus creating a new “gold rush” in the region.

In 2007, Eastern Europe’s emerging markets attracted the most foreign investment, replacing Asia. During the year, US$365 billion out of a total of US$780 billion of global investment in emerging markets went to Eastern Europe, most of which was used in purchasing such financial products as bank bonds.

However, Western Europe’s heavy investments have now become a curse to the economies of Eastern Europe in the current financial crisis.

In order to deal with the financial and economic crisis at home, many Western European countries have withdrawn their investments in Eastern Europe, causing serious capital flight, and thus triggering a systematic risk to the financial markets in Eastern Europe.

Besides the heavy reliance on foreign funds, dependence on exports is also taking its toll on Eastern Europe’s economy. Because of the sharp fall in external demand, especially the demand from Western Europe, exports, which once fueled Eastern Europe’s economic growth, has slumped.

What is more, the heavy debts accumulated during the boom times have become another cause for concern.

During the good times, Eastern European countries introduced high interest rates, and failed to stem domestic enterprises and individuals from borrowing in cheaper foreign currencies at the time like the euro and Swiss franc, which resulted in astronomical foreign debts.

It is estimated that last year, all Eastern European countries’ foreign debts exceeded 50 percent of their gross domestic product (GDP), a far cry from other emerging markets.

High trade deficits and low foreign exchange reserves are another cause for concern. According to statistics, the average ratio of the trade deficit in some Eastern European countries rose to 9 percent of their GDP in 2007 from 2 percent in 2000, and the ratio is as high as 18.5 percent in some of the Baltic countries.

Due to the withdrawal of foreign capital and the bleak economic outlook, all the major currencies of Eastern Europe have been devalued. Since last summer, the value of the Polish zloty dropped one-third against the euro, the Hungary forint 23 percent, and the Czech crown 17 percent.

This has put the Eastern European countries in an even more awkward situation. On one hand, in order to check the foreign capital flight and alleviate the pressure of depreciation, the governments need to raise the interest rates of their home currencies, but on the other, in order to bolster the national economy, interest cuts seem necessary.

Another fallout of the currency devaluation is the surge in the cost of loans in foreign currencies, which also means greater credit risks. And because of that, analysts warn that Eastern Europe could become the subprime of Europe and one of the biggest threats to financial stability in the eurozone.

Credit rating agency Moody’s Investors Service recently issued a warning that the banking system in Eastern Europe was increasingly vulnerable to the economic crisis, because of an increasingly tougher operating environment in the region as a result of the steep and long economic downturn coupled with macroeconomic vulnerabilities.

As Western European banks have invested heavily in Eastern Europe and hold huge amount of bonds, once the financial system in Eastern Europe slumps into a crisis, there is no way the Western banks will be able to escape unscathed.

Therefore, there are grounds to worry that without effective actions taken, Eastern Europe might become the eye of a second economic storm, from which at least Europe could suffer.

lakedaemonian
04-03-2009, 08:49 PM
Latvia's government has fallen.

Ukraine is a serious risk

Poland

Hungary

Romania

ALL are under serious economic threat,and the threat is magnified by their foreign currency borrowings due to plunging local currencies.

Switzerland, Austria,and Sweden could get dragged down the gurgler due to their excessive lending to them.......

Everyone is busy watching US/UK

Eastern Europe could be the catalyst to a 97 Asian/98 Russian/98 ltcm implosion

frostyboy
04-03-2009, 10:13 PM
yep probably most traders are looking at US and UK. eastern europes currency weakness is a like a self fufilling prophecy, once it starts the country without help i doubt could stop it.

p2r
05-03-2009, 09:09 AM
Some parts ring true for NZ too... export dependant, foreign debt, devaluing currency, depretiation. The worry is that even money in the bank is losing if in NZ $.

lakedaemonian
05-03-2009, 09:37 AM
http://www.vanityfair.com/politics/features/2009/04/iceland200904?printable=true&currentPage=all

Interesting and semi-comical(both intentional and unintentionally funny) article on Iceland's financial fireworks.

It's not directly relevant to NZ or Eastern Europe.....but bears some similiarities....more so with Eastern Europe and their foreign currency borrowing pain than NZ learned decades ago.

I'm guessing if this global contagion is not contained, the biggest hit will cacade out of Eastern Europe...moving west at the speed of light....and not stopping until it's done a couple laps around the globe.

Valuegrowth
17-06-2013, 08:31 PM
There will be some bull markets in East Europe in the future. Some eastern European frontier markets are offering real value. During last couple of years some markets did well when compare with other markets.

My ideas are not a recommendation toeither buy or sell any security or currency. Please do your own research priorto making any investment decision.