* Latvian PM resigns, government falls
* Serbia to seek 2 billion euros from IMF
* No coordinated plan seen for central/eastern Europe
* Analysts say official action needed
* Czechs say do not need aid, Poles say worst over
By Jan Lopatka
PRAGUE, Feb 20 (Reuters) - Latvia's government collapsed on
Friday and Serbia said it would seek to expand an IMF rescue
package to 2 billion euros, as shockwaves of the global economic
crisis swept across central and Eastern Europe.
The region's currencies remained under pressure due to an
increasing conviction that some kind of common policy response
was needed to prop up emerging European Union members, many of
which depend on external financing.
But policymakers in the EU's richer states hinted there was
no fresh coordinated initiative in the works, failing to soothe
investors spooked by expectations of a sharp contraction in
economic growth and frozen debt markets.
The new EU member states have seen their vital export
sectors plummet due to a collapse in western European demand,
and currency drops exposed those with large current account
gaps, such as Romania, and heavy foreign borrowing like Hungary.
Following a comment on Thursday from Germany's government
that it would support the region, but through the IMF, European
Economic Affairs Commissioner Joaquin Almunia said the EU was
already backing it through the tools that were available.
"We are supporting the economies through the instruments we
have in our hands in the EU, and I mentioned before from the
structural and cohesion funds, the EIB lending activities, and
we can also mention the EBRD," Almunia told a news conference.
He was referring to the European Investment Bank, the EU's
lending arm; and the European Bank for Reconstruction and
Development, in which the EU has a stake.
"On top of that, the private sector should support their own
investment," he said, in an apparent reference to banks from
Austria, Italy, Belgium, France and Germany that have invested
heavily in the region and now dominate its banking sector.
The crisis has already taken political victims. Latvian
Prime Minister Ivars Godmanis resigned to stem a fall in
popularity during the crisis. His government took a 7.5 billion
euro IMF-led bailout in 2008, and it expects the Latvian economy
to contract 12 percent this year.
In Serbia, Prime Minister Mirko Cvetkovic said his
government was now looking to more than quadruple a $520 million
IMF loan to help the country to forestall financial turmoil.
"We are expecting about 2 billion euros from the IMF for the
currency reserves, and from the European Union we are seeking
about 400 million euros," he told Reuters.
MORE HELP DESIRED
World Bank President Robert Zoellick was quoted in the
Financial Times on Thursday as saying the EU should do more to
support economies in central and eastern Europe.
The Czechs said they needed no outside aid and the Poles
said a steep fall in the zloty currency was over, but analysts
said markets were also looking for more than offered by Almunia.
"While we were hopeful some more action will be taken...
this also sounds like no more help is expected, the available
tools should be enough and good luck Western banks to solve your
East European problems on your own," said analyst group 4CAST.
"Though there has been lots of noise recently about rescuing
the region, it now looks like all this was just smoke without
the fire. We have the feeling it will be a rude awakening for
some within a very short time."
Austria, whose banks have lent the equivalent of about 75
percent of the country's GDP in eastern Europe, has called for
coordinated EU action to support the banking sector there.
Analysts said the level of risk varied significantly in the
individual countries, with Romania on the more dangerous side
and the Czech Republic and Poland less exposed, but suffering
from contagion.
The Czech government backtracked from Prime Minister Mirek
Topolanek's comment on Thursday that the fact that the Czechs
are considered in the same pack with more exposed countries made
it possible that it too would have to seek a rescue.
[]
Polish Prime Minister Donald Tusk said his government had
achieved its goal of stabilising the zloty by selling some
euro-denominated EU subsidies and that the currency was stable
for now. []
Markets got a boost mid-morning from a World Bank report
holding out the chance that some countries will avoid recession.
But investors' aversion to risk due to more signs of a slumping
global economy kept the region's markets under pressure before a
weekend meeting of the European members of the G20.
[].
The meeting was however expected to focus on sending an
anti-protectionism message and discuss common criteria for
dealing with risky securities. []
Analysts were sceptical the region had gone through the
worst, and said policymakers should act fast. "It would have to
be soon, or we'd flip into the negative scenario very quickly,"
said Koon Chow, strategist at Barclays Capital.
(Additional reporting by Marcin Grajewski and Jan
Strupczewski in Brussels; editing by David Stamp)
