Like a band reforming to trot out the old hits in the hope of funding their impending retirement, the prospect of Grexit somehow doesn’t seem as exciting the second time round.
Back in 2011 and 2012, when the threat of Greece leaving the euro was taken very seriously by investors, the knock-on effects were considerable. The future of the eurozone was held to be at stake; the bond spreads of the other troubled peripheral countries, notably Spain, Portugal and Italy, blew out to alarming proportions. Read more
A story told in the Bank of England goes like this. Shortly after the fall of the Berlin Wall, a group of Russian central bankers with solid grounding in Marxist economics came to London for a training course at the BoE. They patiently absorbed the theoretical run-down of supply and demand curves and how prices were determined, and then asked “But who sets the price?” A world without a state official with a clipboard announcing the cost of everything was unthinkable. Eventually the exasperated BoE economists took them on a trip to Smithfield meat market in the City of London to see the magic in action.
After the Wall came down in 1989 – triggered by a single unguarded remark by an East German Politburo member in a press conference – the speed and size of changes in the economies of central and east European (CEE) and the former Soviet Union (FSU) were unprecedented since the Second World War. Twenty-five years later, with currency crises wracking Ukraine and Russia, and FSU economies like Belarus and Moldova struggling to emerge from the Soviet era, the dispersion of performance has been dramatic. Read more
By Jan Cienski of demosEuropa
A decade ago, Europe bound together the two halves of the continent, torn apart by war and then by long years of dysfunctional communist rule.
The case for European Union expansion was not always obvious. Some worried about annoying Russia, others felt that saddling the EU with bedraggled countries still fresh from transforming themselves into market economies would drag down western Europe.
They need not have been concerned. Read more
First quarter GDP figures from Croatia and Slovenia show that the former continues to slide backwards, albeit at a slower rate, while the latter continues its export-led recovery.
Croatia’s economy has not shown meaningful growth since 2008 and remains lumbered with structural problems that the government seems barely able to address. It shrank again in the first quarter, by 0.4 per cent, having contracted by 1.2 per cent in the last quarter of 2013. Read more
By Liviu Voinea, Minister Delegate for Budget, Romania
The recent turmoil in some emerging markets sharpens a focus on economic fundamentals. And the capacity of an economy to implement a proper policy response to an adverse shock is itself becoming a new macroeconomic fundamental.
Emerging economies from the EU have implemented internal adjustments and by doing so they have managed to contain their public finances and debt – but at a cost. Europe is now confronted with a demand gap. The first step in addressing the demand gap is to acknowledge it. Emerging economies in the EU are facing a familiar set of problems: very low, even negative core inflation and a declining or negative current account balance. Read more
Cut the coal, please
Krakow was known for its choking smog in Communist times, when Poland’s medieval capital was bathed in the corrosive stench being pumped out by the nearby Lenin Steelworks.
Fast forward a quarter of a century, and Krakow’s air is still polluted – although the culprit is no longer the steel mill (now owned by Arcelor Mittal) but instead the thousands of people who still heat their homes with coal. The result has been some of the worst air in a still-smoggy country where coal generates about 90 per cent of Poland’s electricity. However, the local government in Krakow is now moving to ban home heating with coal over the next five years. Read more
If the normally bearish Capital Economics is starting to sing the economic praises of central Europe it might be time to admit that the downturn is well and truly done and that an economic rebound is underway.
Capital Economics was bearish about the future of the euro, and gloomy about the prospects of CEE countries closely tied to the eurozone. Now that the period of greatest danger for the common currency seems to have passed, the London-based analysis outfit is turning strikingly optimistic on central Europe. Read more
By Ben Aris of bne
Despite its current financial woes, Slovenia is the most prosperous country in Emerging Europe, according to the latest annual prosperity index from the Legatum Institute. Armenia comes in last.
While income is an important part of prosperity, the institute has broadened the definition to take into account of some of the non-material things that make life worth living, as defined in sub-indices such as “Safety & Security”, “Personal Freedom”, “Social Capital”, “Education”, among others. Read more
Poland’s economic recovery is gathering steam, with new industrial production numbers showing that growth in central Europe’s largest country is picking up sharply.
September’s industrial production was accelerated to 6.2 per cent on an annual basis, up from 2.2 per cent in August. Read more
A lot of recent numbers indicate that central Europe’s economies have turned the corner and are starting to rebound after a slump late last year and in the first months of 2013.
More data buttressing that case came in over the last few days. In Poland, new car registrations in September were up by 16.5 per cent at 24,963 cars – that’s 13 per cent higher than in August. Read more
Central European economies are continuing to show signs to recovery, with the newest purchasing manager index reports released Tuesday surprising on the upside despite slightly worse numbers from Germany – the region’s largest export market.
In Poland, the largest CEE economy, PMIs jumped to 53.1 where anything above 50 marks an economic expansion. That is the highest level in two and a half years and was due largely to improvements in the employment picture. Read more
Online merchant Amazon is contemplating building a new network of logistics centres in central Europe after being hit with strikes at its German warehouses, according to the Polish press.
Amazon is looking at three locations in Poland and two in the Czech Republic, according to the Puls Biznesu paper. Officials in Poznan, in western Poland, and in Wroclaw, in the south-west of the country, confirmed to the Gazeta Wyborcza newspaper that there were plans to build logistics centres near their cities. Read more
By Lucian Anghel, chairman of the Bucharest Stock Exchange
The Bucharest Stock Exchange, or BVB, has never played a big role in Romania’s economy; nor has it been the focus of much international attention.
But, after a period of turbulence, during which the country has suffered political storms and frenetic general elections, that could all be about to change. Read more
Central Europe’s economies are showing strong signs of life, if the crop of manufacturing PMI data released on Monday is anything to go by. The region – which has become the EU’s low-cost workshop – is being lifted by the broader eurozone revival.
For Poland, the Purchasing Managers Index showed manufacturing quickening its pace in August, the second positive month following a 14-month slump. Polish PMI beat expectations, rising to 52.6 from July’s 51.1, where anything above 50 indicates an expansion. Read more
By Nicholas Watson of bne
Europe may be in the doldrums, but some large infrastructure projects, crucially backed by multilateral lenders and export credit agencies, look set to give Emerging Europe’s economies a fillip over the next couple of years.
“The outlook for infrastructure projects is better, definitely we’ve seen a better start in 2013 and that will continue in 2014,” says Werner Weihs-Raabl, head of infrastructure finance at Erste Bank Group. “Romania and Croatia, for example, are building realistic projects; a few years ago it was rather castles in the sky.” Read more
Solyom Hungarian Airways, the new Hungarian airline that is promising to serve 96 destinations with a fleet of 50 jets by 2017, has barely launched its website, let alone a fully loaded aeroplane – before coming under attack.
And from an unusual source: Wizz Air, a low-fare airline in Central and Eastern Europe, is normally a low-key player when it comes to commenting on rivals – certainly it eschews the headline-grabbing verbal fireworks associated with Ryanair. But a statement by Wizz on Thursday was a little more spiky than usual. Read more
Shale gas and oil have more than usual appeal for Lithuania, where the government is eager to reduce its dependence on imports from Russia.
But a combination of environmental protests and government plans to hike royalties to the highest level in the world are creating daunting obstacles to investment. Chevron, the US oil major, could be the first to baulk at the new barriers. Read more
By Gunter Deuber of Raiffeisen Bank International
Positive developments in Romania are turning the country into something of an investor darling.
With economic growth in the first quarter of 2.2 per cent year-on-year, Romania was one of the best performing economies in the EU. Full-year, economic expansion of at least 2 per cent looks perfectly feasible, making Romania a star performer among its regional peers.
What’s behind the good news? Read more
Capitalism is supposed to be all about second acts – getting up after failing, and using the experience to do better the next time around. That’s the path taken by Ludwik Sobolewski, fired as head of the Warsaw Stock Exchange after a conflict of interest scandal who is now taking over the stock exchange in Bucharest.
Sobolewski brings experience and a bit of star power to Bucharest, which is growing well but is still a much smaller exchange than the one he leaves behind in Warsaw. Read more