By Lesley Wroughton and Carolyn Cohn
WASHINGTON/LONDON, Feb 27 (Reuters) - The heads of three
global development banks said on Friday they would seek
solutions to an economic crisis in eastern and central Europe as
they launched a joint programme to lend up to 24.5 billion euros
($31.2 billion) in the region.
The action plan by the World Bank, the European Bank for
Reconstruction and Development (EBRD) and European Investment
Bank (EIB) comes as European Union members prepare to discuss
aid to banks at an emergency summit on Sunday.
The banks said the two-year plan would provide quick,
large-scale financing to banks and ensure that companies,
especially small- and medium-sized enterprises, get access to
capital.
"The institutions are working together to find practical,
efficient and timely solutions to the crisis in eastern Europe,"
said EBRD President Thomas Mirow in a statement.
"This joint action plan will help speed up the delivery of
vital finance through the banks to support the real economy of
hard-hit countries in Central, Eastern and Southern Europe,"
said EIB President Philippe Maystadt.
Another EBRD official said the plan would feed into the EU
summit's efforts to contain the economic crisis engulfing
emerging Europe, that has seen some of its newer members seek
emergency funding from the International Monetary Fund.
"This is what we are wanting to put into that summit, this
is what we are doing," said an EBRD spokesperson.
World Bank Group President Robert B. Zoellick said in the
statement the region's economic crisis was rapidly turning into
a "human crisis", adding that the partnership would help address
the risk of a banking sector crisis in eastern Europe.
Massive expansion of international banks into eastern Europe
has made the region's banking system vulnerable to credit
strains that arose from the U.S.-led housing collapse that
spread into Western Europe.
The three development banks said they will mobilise other
resources for the region through their lending and guarantees,
and work with Western parent banks that have promised support
for their struggling subsidiaries in the region.
The lenders said their aid will be in the form of equity and
debt finance, credit lines and political risk guarantees.
Under the plan, the EBRD will provide up to 6 billion euros
this year and next to the region's financial sector and will
include trade finance through banks.
The EIB said it will lend 11 billion euros to businesses in
central, eastern and southern Europe, of which 5.7 billion euros
is ready to be disbursed, and a further 2.8 billion euros should
be approved by the end of April.
The Washington-based World Bank said it intends to propose
lending and political risk guarantees of up to 7.5 billion euros
for banks, infrastructure projects and trade financing.
IS IT ENOUGH?
The World Bank's Zoellick has urged the EU to do more to
support central and eastern Europe to ensure that the region's
progress to market economies is not set back by an economic
crisis.
In a letter to Zoellick on Thursday, EU Monetary Affairs
Commissioner Joaquin Almunia sought to dispel fears the bloc was
not doing enough for its poorer eastern neighbours and detailed
EU aid schemes to the region.
The lenders said national policy responses were necessary
but may not be enough to contain the crisis and maintain lending
to the real economy.
They welcomed the support that has been given to the region
by the International Monetary Fund (IMF), which has approved $50
billion in emergency packages for Iceland, Hungary, Latvia,
Ukraine, Serbia and Belarus in recent months.
"The market has been waiting for a deal like this and it is
supporting the currencies, but the economies are still in a
difficult position and I think they will need a wider deal from
the EU," said Beat Siegenthaler, senior strategist at TD
Securities.
The Polish zloty <EURPLN=>, Hungarian forint <EURHUF=> and
Czech crown <EURCZK=> rose at least 1 percent against the euro
on Friday following the news of the programme.
"The amount of cash is small in the whole scheme of things
-- 25 billion euros sounds like a lot of money, but when the
banks have lent Eastern Europe about 1.7 trillion dollars, 25
billion is peanuts," said Nigel Rendell, emerging markets
strategist at Royal Bank of Canada.
"Ultimately we will have to get a much bigger package and a
coordinated response from the IMF, the European Union and maybe
the G7."
(Additional reporting by Sebastian Tong, Martina Fuchs and
Peter Apps; Editing by Jason Neely)
