The European debt crisis dominated proceedings at the 10th Annual Regional Finance and Investment Conference for SouthEast Europe held in Dubrovnik in late October. Among the key concerns: the effects of a weak global macro-economic environment on the region’s economies; a drying up of capital flows from an overwhelmingly foreign-owned banking system; and the chilling of the relationship with the European Union which had driven so much of the change in the region in the last decade-and-a-half.
That was the bad news. The good news was, as many speakers argued, that the region’s countries had made important strides in macro-economic policymaking, and had already moved to position themselves against a downturn after the first (Lehman-led leg) of the crisis. While no one underestimated the scale of the problems facing the region, they at least understood them, and were deploying tools to deal with the crisis.
Opening the conference, Croatian state secretary Zdravko Marić, emphasised how crucial coming EU membership remained for his country. But like other speakers he said the countries in the region needed to rely more on their own resources to deliver sustainable economic growth. Structural reforms and fiscal probity were key to delivering those aims, said Bozo Prka, president of the management board of PBZ. That was a message echoed, in a different key, by central bankers from across the region. “People need to understand what central banks can and cannot do,” said Bojan Marković, deputy governor of the National Bank of Serbia. “We cannot be relied on to deliver growth by monetary means alone.” Boris Vujčić, deputy governor of the Croatian National Bank, said that on no account should central banks lose sight of their central mission of fighting inflation.
Financial stability had been one area where policymakers and regulators had arguably outperformed their peers in Western Europe; the region’s banks were well capitalized and while non-performing loans (particularly those with embedded currency exposure) were an issue in some countries, the risks seemed manageable.
Francis Malige, director of financial institutions at the European Bank for Reconstruction and Development, said this – along with initiatives such as Vienna, and Vienna-plus - made it easier to ensure that lending to companies and households could be maintained.
Still, in the longer term, it was crucial to develop local sources of capital, encourage savings and pensions, and more generally, enable the region to chart its own economic, social and political future.
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