EU Financing To Shore Up Troubled CEE Markets

On the back of the EUR20bn IMF-led bail-out package for Hungary, announced on October 28, the European Union has significantly stepped up its level of support for member-states suffering from capital shortages. As part of the aid programme, the EU has re-enacted an obscure regulation (EC no. 332/2002) that will allow the organisation to borrow from international capital markets to help shore up emerging European economies facing significant balance of payments pressures. Specifically, the European Commission, on behalf of the EU, will be allowed to contract loans, from which the funds will then be lent on with favourable terms to non-eurozone, member-states . This means that the EU will effectively act as guarantor for a source of financing worth up to EUR12bn per country (the limit according to the regulation) for countries without the wherewithal to tap capital markets under the present conditions.

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