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| CENTRAL EUROPEAN CURRENCIES AGAINST THE CRISIS 24/02/2009 |
| (2009-02-24) |
| Last updated: 2009-02-25 16:42 EET |
Early this week, the central banks of Romania, Hungary and the Czech Republic conveyed a joint message of support for the national currencies, deeply affected by the negative perception of the region.
The devaluation of the Romanian leu, the Polish zlot, the Hungarian forint and the Czech crown, which has occurred against the backdrop of the international rating agencies’ negative reports has deepened lately. The main cause is the growing fear that some of the Central and East European countries will need foreign aid because of their debts in hard currency and of the impact which problems in the banking sector have.
In an unprecedented joint move, the governors of the central banks in Bucharest, Prague, Budapest and Warsaw have estimated that the weakening of the currencies in the area is exaggerated and does not reflect economic realities. The governor of the National Bank of Romania, Mugur Isarescu says that the exchange rate is beyond the bases and has a negative impact on the economy. As compared to the beginning of the year, Romania’s national currency, the leu has depreciated by about 7.5% as compared to the Euro. However, Isarescu gives assurances that the National Bank of Romania is ready to take action in order to prevent possible destabilizing fluctuations of the exchange rate. Moreover, he has expressed his hope that the mother banks in Western Europe will keep their commitments to funding their subsidiaries in Central and Eastern Europe. Mugur Isarescu:
“A certain adjustment of the exchange rate is indeed necessary to the economies in this region, but the excessive devaluation of local currencies, which is not justified given the economic bases, can give rise to destabilizing fluctuations and that is why, it must be avoided. The effects of those measures will become apparent with a certain delay though, we must admit. As regards the dependence on the mother banks abroad, the European decision-makers’ rapid reaction has contributed to stabilizing the West European financial system, liquidity and capital increasing significantly. The mother banks in Western Europe keep their commitments to their subsidiaries in Central and East Europe.”
Mugur Isarescu has also warned that far-fetched media reports can hamper investments.
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