THE SOVEREIGN DEBT CRISIS AND REFORMS IN EUROPE AFTER THE FINANCIAL CRASH OF 2008

FINANCE AND ECONOMY IN CEE, THE DANUBE REGION: ECONOMIC AND SOCIAL DEVELOPMENTS, , , , , , , , , ,

Austrian National Bank, Vienna

Is growth normal and are the recessions of the 1970s/80s and since 2008 just the exceptions to the rule? Calls for reform always follow economic crises. Here are two examples of reforms that were introduced in Europe and can certainly not be seen as meaningful: Due to the serious sovereign debt crisis starting in Greece in 2010 the Greek government was obliged to carry out a multitude of reform measures, called “The Long March to Recovery”, among them laws on household insolvency, bankruptcy, foreclosures and pension reform. In how far were those really reforms and how could they benefit the Greek society? The second example is taken from Latvia: When the country emerged from the USSR it was without debt and mortgages. Then mostly Scandinavian banks moved in and gave extensive loans to the Latvians which finally could not be paid back and the Latvians faced the threat of foreclosures. “Reforms” were carried out that the duty to pay back the loans could be extended to family members, which ended in foreclosures anyway. In which way are these two examples meaningful reforms?…

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THE EXPANSION OF AUSTRIAN BANKS INTO CEE AFTER 1989

FINANCE AND ECONOMY IN CEE, THE DANUBE REGION: ECONOMIC AND SOCIAL DEVELOPMENTS, , , , , , , ,

 

Branch office of the Austrian S-Bausparkasse (Erste Bank) in Romania

Since the collapse of communism, foreign banks bought up roughly 80 per cent of all the banking business in the new Central European member countries of the European Union. The most successful banks were those that bought early. The markets were still relatively small, but growth rates were high, and so were profit margins. To many foreign financial experts it was a surprise who got in first. Germany was the region’s biggest trading partner, but German banks were busy at home with the shocks and costs of the unification of Germany. Somehow they left Eastern Europe to their small neighbour, Austria. Raiffeisen, a co-operative banking group, which had already expanded into Hungary before the coming down of the Iron Curtain in 1987, was in seven more countries by 1998. Even a little earlier, the banks making up Creditanstalt and Bank Austria, which merged in 1997 (BA-CA), first entered the market. BA-CA was bought by HVB of Germany in 2000, which was in turn bought by UniCredit of Italy in 2005. In both acquisitions the BA-CA’s business divisions in Central and Eastern Europe were the big prey the predators were after. The third Austrian bank to join in the rush was Erste Bank with its purchase of Ceska Sporitelna, a Czech bank, in 2000.…

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