Eurasia Press & News
Hard currency loans to Serbia, Estonia and Latvia are the most at risk of default in central and eastern Europe, according to the International Monetary Fund.
The IMF says that Western banks risk losing US$160 billion of a total US$1.6 trillion placed in the central and eastern European region, daily Danas writes.
Economic analyst Bosko Zivkovic told Danas that the Financial Times has warned earlier that Serbia would face the same problems with servicing foreign private debt as the group of Baltic states.
“Analysts of that newspaper see a problem in the fact that credit was approved to customers and industry in foreign currency, so every change in the exchange rate of the reserve currency, in this case the euro, causes a growth in credit risk and impairs the ability of the borrower to return the loan,” Zivkovic said.
The Financial Times analysis is not far off the mark, according to Vladimir Gligorov, an advisor at the Vienna Institute for International Economic Studies.
“The fact that we reached an agreement with 10 of the largest banks in central Europe does not mean that the problem of debts and servicing has been overcome,” Gligorov told the B92 news group. “Information that the real estate sector in Serbia is not able to regularly service its debts to foreign banks suggests that this sector is bankrupt.”
“The Serbian government clearly has no idea how it will establish the conditions for economic growth either next year or in 2011,” Gligorov added. “That is the core of the problem, because domestic demand cannot be increased, wages will be frozen, exports are at a standstill, and there is no investment,” he said.
