WRAPUP 1-Czechs cut, Hungary unveils bank plan as crisis bites

                                
 By Michael Winfrey
                                
 Economics Correspondent, Central Europe and the Balkans
                                
 PRAGUE, Nov 6 (Reuters) - The Czechs joined Europe's big
central banks by slashing interest rates on Thursday and Hungary
unveiled a $3 billion plan to shore up banks in an effort to
ease the grip of the economic crisis on ex-communist Europe.
                                
 Poland's central bank chief said he was convinced it was
time to start lowering the cost of borrowing in the biggest
economy of a region where growth and inflation are falling
quickly as demand for its exports and access to credit dry up.
                                
 The Czech central bank (CNB) cut interest rates by a much
more than expected 75 basis points to a European Union low of
2.75 percent, the biggest move in more than six years and the
lowest level since mid-2007.
                                
 The decision came moments before cuts by the Bank of
England, by one and a half percentage points to 3.0 percent, and
the European Central Bank and Swiss National Bank by half
percentage points each.
                                
 The Czech crown briefly dropped by almost 1 percent versus
the euro after the announcement, and was tracked by the Polish
zloty [ID:nL6209602].  
                                
 "This is a very clear signal that the CNB is very worried
over the slowdown in the Czech economy -- and rightly so," said
Lars Christensen, head of emerging markets research at Danske
Bank. "The cut should also increase the likelihood of rate cuts
in other countries in the region." 
                                
 
                                
 GROWTH SLIDING
                                
 Central Europe, long seen as a relative "safe haven"
investment destination in times of heavy emerging market
turmoil, has thus far avoided serious crisis. No banks have
collapsed.
                                
 But since September, the global crisis has had two main
impacts. The collapse in demand from the euro zone, the region's
main export market, has hit producers. And the credit crunch has
made it harder for firms and consumers to borrow cash.
                                
 Now producers in major exporters like Hungary, the Czech
Republic and Slovakia are cutting jobs, bond market and
interbank lending liquidity has dried up and stock markets have
suffered heavy losses.
                                
 Earlier on Thursday, Czech Finance Ministry officials said
they would likely cut their 2009 growth forecast from 3.7
percent now. Neighbouring Poland expects growth to slow to 3.5
percent, from 5.5 percent forecast for 2008.
                                
 Analysts polled by Reuters had expected Polish policymakers
to wait until the first quarter of 2009 before cutting rates
from 6.0 percent now, but the head of the central bank indicated
that now a cut could come sooner.
                                
 "After the Czech central bank decision I'm now even more
convinced an easing cycle in Poland should be started," Polish
central bank Governor Slawomir Skrzypek told Reuters.
                                
 Also on Thursday, Austria's Raiffeisen International
<RIBH.VI>, emerging Europe's second-biggest bank, cut its 2008
net profit forecast and put mid-term goals under review as weak
economic development will likely hit growth [ID:nL5485377]. 
                                
 
                                
 HUNGARIAN IMF PLAN
                                
 Already heading for recession, Hungary said that as part of
a $25 billion EU, International Monetary Fund rescue package, it
would extend nearly $3 billion to shore up banks and cut its
budget deficit to boost economic stability.
                                
 Hungary is the most vulnerable country among the EU's
ex-communist members -- its export-driven stance makes it most
exposed to the euro zone slowdown -- 
                                
 September industrial output shrank by an annual 5.3 percent
[ID:nL680750], and a heavy reliance on foreign borrowing means
investors see it more risky than its peers.
                                
  On Thursday, the government asked the IMF to provide 600
billion forints ($2.95 billion) in possible funding for
Hungarian banks considered to be of systemic importance to boost
confidence in the entire sector and promote lending.
                                
 "If we can tell the markets that not only is a bank doing
well but we can back it up with a guarantee, it can borrow at a
cheaper rate," said Central Bank Governor Andras Simor.
                                
 "With these shares, the government will get rights that
provide it with appropriate guarantees."
                                
 (For a Factbox on the details of the IMF deal, click on
[ID:nL6465762]).
                                
(Reporting by Jan Lopatka, Jason Hovet, Balasz Koranyi and
Dagmara Leszkowicz; Editing by Toby Chopra)