Eastern Europe and the Escalating Debt Crisis: Fitch Ratings

Fitch Ratings recently revealed that Eastern Europe is the market which is most likely to be affected by the region’s debt crisis. Governments there, therefore, will need to pay higher interest rates on international bonds.

The region is anticipating $19 billion sovereign bond redemption by next year. In addition, IMF and European Commission debt repayments will also be demanded.

Over the past few months, Europe’s debt crisis has worsened and economic recovery spirals further from the region’s reach. As a result, Fitch has lowered its credit outlooks for Bulgaria, Latvia, Lithuania, the Czech Republic, Hungary, Ukraine and Turkey.

“Central and eastern Europe is by far the most exposed emerging-market region to the euro-zone crisis owing to strong trade flows, banking-sector linkages and, in some cases, portfolio investments currency risks and substantial gross external financing requirement,” Fitch’s Charles Seville wrote.

In November, Christine Lagarde, managing director of the IMF, said Eastern Europe is now at risk of a credit shortage as western banks begin to withdraw funding. Yesterday, Morgan Stanley added that the countries in the region may be forced to utilize global support packages or seek additional IMF aid.


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