Europe reducing its deficit

If a country has not lost credibility among investors, it can repay its debts over many years – concluded the panellists of XX Economic Forum in Krynica.

- Japan is a perfect example; its debt exceeds 200 percent of GDP, and in spite of this fact nothing goes wrong – explained Ryszard Petru, the chief economist of BRE Bank. – The country is perceived as one of the reachest, and there is a great interest in its bonds.

[wyimek]4 PERCENT at this pace Eastern European economies should grow next year[/wyimek]

Professor Witold Orłowski, the chief economist of PricewaterhouseCoopers, who presented during the forum the latest report compiled by PwC ‘Hard Landing 2’, explained that after recovery from recession we can observe anxiety in Europe and the world about the method and speed of reducing deficits. – In fact, besides Hungary, no European country has problems with excessive debt – said the professor. – Still the dynamics of debt increase in Latvia can cause concern.

According to the report, Central and Eastern Europe is most probably one of these regions of the world, which suffered most as a result of the global financial slump. After difficult situation in 2009 – the year of recession – a slow upward trend returned to the majority of states. The forecasts for 2011 have been quite optimistic for all countries in the region – GDP growth is expected to increase from 1-1.5 percent in 2010 to 3-4 percent in 2011. – Unfortunately, the anticipated negative effects of the second wave of financial crisis can lead to a correction of these forecasts – warns the report.

What should cause the greatest concern among politicians and economists is the ratio between currency reserves and long-term debt and the current account balance. In a few countries it is dangerously low – e.g. in the Balkans and Baltic states.

The economic slow down and problems with external financing triggered by the second wave of the crisis can also translate easily to problems of national banking sectors. The report regards Latvia and Lithuania as the countries, which are most prone to the indebtedness crisis. The appearance of very serious dangers can put at risk development of Belarus, Ukraine and Bulgaria. Special attention is required for Hungary, Croatia, Romania, Estonia and Serbia. As compared with these countries, the issues of Slovakia, the Czech Republic, Russia and also Poland and Slovenia seem to be less dangerous.

– The key to crisis avoidance is fiscal credibility – according to Petru. – the payment deadlines of Greece and Portugal are very close – thus they are most affected by risk. The United Kingdom is heavily indebted, but its debt is spread over time. What is important, Poland has much better structure of debt repayment than Greece, or even Portugal.

The Strategy is like a Toolbox

[ramka]Interview with, Jerzy Buzek, Chairman of the European Parliament

[b]Rz: Are you concerned with the effectiveness of the new 2020 strategy? I got this impression when listening to the plenary debate[/b]