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The Weakest Link is Weakening

Posted by Larry Doyle on March 2nd, 2009 6:00 AM |

The other day I highlighted the fact that 12 eastern European countries would solicit a bailout from the European Union over the weekend in Brussels. I defined this bloc of eastern European countries as currently the Weakest Link in the global economy. Well, if they were the weakest link then they just got weaker as they were rebuffed in their request for aid.

The dynamic at work in the weekend’s emergency meeting held in Brussels is a play on beggar-thy-neighbor policies implemented during times of economic stress.

There are actually a number of factors influencing the European Union’s refusal to provide bailout money to these eastern European nations. Included in these factors are the following: (more…)

The Weakest Link

Posted by Larry Doyle on February 27th, 2009 10:45 AM |

It is widely believed that the weakest link in the global economy centers on Eastern Europe. In light of that, the leaders of 12 eastern European countries are holding an emergency economic summit this weekend. From that summit, it is expected that these countries will request an international bailout.

 As of now it appears the countries in greatest degree of stress are Hungary, Ukraine, and Serbia. The expectation is that the group of countries will request the European Union to arrange a $230 billion bailout package. Who would provide the funding? A conglomerate of European Central Banks, the International Monetary Fund, the World Bank, European Investment Bank, and European Bank for Reconstruction and Development.

A major issue for eastern Europe is that their creditors, largely western European banks along with western European countries, are not exactly in great shape themselves. These countries may look to accelerate their entry into the EU and the full adoption of the Euro along with it.

As the pressure and stress builds, the chance of political dislocation also grows.   

For further details on how Hungary Seeks $230 Billion Bailout for Eastern Europe.  I will be monitoring this situation as it develops.  As our global economy is very much interconnected, the increase in sovereign credit risks is a very serious concern. 

LD






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