It can only be a matter of time before Eastern European countries reject the EU’s austerity plans. By cutting their lending to central and eastern Europe, the western banks which dominate CEE banking are causing a full-blown credit crunch.
Western European bank deleveraging poses an especially big threat to Eastern Europe, as I warned in The Game is UP for the Commodity Super-Cycle As the Yo-yo Years Begin. After all, this is a region still struggling to recover from the last credit recession, and facing further financial turmoil from the euro-zone crisis (see Central Europe’s Special Hell).
The IMF and the European Bank for Reconstruction and Development continue to present a united front on the need for austerity to tackle the debt crisis. But as Emerging Markets magazine reports, the battle over austerity and growth has moved east, as hostility to further cuts in spending and tax hikes spreads across large swathes of Europe.