Eastern Europe faces depression without bailouts

A shopper takes bread at the first social SOS market in Belgrade on Wednesday. The Association of Free and Independent trade unions opened the first SOS shop with reduced prices. They will open nine more SOS shops in Belgrade by the end of May, while similar ones will soon start working throughout Serbia. The intention is to reduce costs to share the burden of the economic crisis as equally as possible. Photo: AFP

Eastern and central Europe could nosedive into a deep depression without international multi-billion-euro funding such as the IMF-led package granted this week to Romania, analysts warned Thursday.
Romania was thrown a 20-billion-euro (27-billion-dollar) lifeline by four international lending bodies on Wednesday, becoming the latest country in the struggling region to seek such a bailout amid the ongoing worldwide economic downturn.
In the current global financial crisis, Romania is the fifth eastern and central European nation after Hungary, Latvia, Serbia and Ukraine to turn to the International Monetary Fund (IMF) for help.
"Without the funding, these economies would face... a steep recession/depression that could possibly get close to the downturn after the Soviet bloc's demise," IHS Global Insight economist Ralf Wiegert told AFP.
Romania's bailout could also spark similar packages for Lithuania and Turkey, analysts predicted, as eastern Europe battles a crisis that has already pulled the eurozone, Japan and the United States into recession.
Wiegert forecast Thursday that Lithuania would be the next in line for financial assistance.
"Most likely Lithuania will be next with a 5.0-7.0-billion-dollar package," said Wiegert, adding however that no official request or negotiations had yet begun.
Charles Robertson, ING's chief economist for Emerging Europe, Middle East and Africa, said Turkey could in fact be the next recipient.
"Turkey is next in line for an IMF deal... estimated at 20 billion dollars," Robertson predicted, but he also argued that there were large differences between economies in the region.
"Russia has been able to deal with this crisis without considering recourse to IMF funding," Robertson said.
"Poland has been giving more money to the IMF, rather than receiving it, which emphasises how well it is doing."
On Wednesday, Bucharest signed an agreement on a two-year standby arrangement, worth 27 billion dollars, with the IMF, the European Union, the World Bank and the London-based European Bank for Reconstruction and Development (EBRD).
Ratings agency Fitch argued that the Romania package would give the country room to manoeuvre at a crucial stage.
"Fitch views Romania's proposed IMF programme as supportive for its ratings as it should help to meet the country's sizeable external financing needs and provide a breathing space to rebalance the economy," said Andrew Colquhoun, Director in Fitch's Sovereigns group.