BERLIN, Germany -- Europe’s main development bank said Thursday it would pump €432 million into the East European subsidiaries of the Italian bank UniCredit, the largest banking group in the region, to encourage lending. Without more such support, it added, hopes for an economic recovery for the region next year could be in jeopardy.
The loans are expected to be the first of several as the European Bank for Reconstruction and Development, or E.B.R.D., holds talks with other Western banks that have established a major presence in the region over the past few years. These could include the Austrian banking group Raiffeisen and Swedbank of Sweden.The loans are intended not to clean up bank balance sheets but to support the local branches in extending loans to small and midsize companies, which have faced a serious credit crunch since the beginning of the global financial crisis last year. Unless they obtain fresh loans, chances for a sustained recovery, which is expected during the second half of 2010, will be threatened, the bank warned.“Our underlying outlook assumes continued external engagement, particularly from the Western parents of banks in the region,” said Erik Berglof, chief economist of the E.B.R.D.The E.B.R.D.’s latest forecasts, released Thursday, showed that the economies of Central and Eastern Europe will contract 5 percent this year. Some countries, particularly Poland, are expected to fare better because of comparatively stable domestic demand, but other countries including Hungary and the Baltic States are already facing double digit declines.The E.B.R.D. recently extended loans to Banca Comerciala Romana, a Romanian subsidiary of the Austrian bank, Erste Bank. But the agreement with UniCredit is the largest of its kind.“As the single biggest financial investor and the largest banking group in Central Europe and Eastern Europe, the E.B.R.D. and UniCredit have a common purpose and special responsibility to this region to ensure the continuing flow of lending to the real economies in times of crisis and scarce external funding,” said Thomas Mirow, the E.B.R.D. president.UniCredit’s chief executive officer, Alessandro Profumo, said in a statement that his bank would use the loans to support the local branches and the local economies.Most of the €432 million will be earmarked for UniCredit’s subsidiaries in Ukraine and Kazakhstan, with each receiving €100 million. Ukraine’s economy will fall by 10 percent this year compared to 2008, according to the E.B.R.D. Kazakhstan is suffering a serious banking crisis.UniCredit’s subsidiaries in Hungary, Bulgaria and Croatia will each receive €50 million. The remainder will be distributed to its branches in Serbia, Bosnia and Kyrgyzstan.The E.B.R.D. has already increased its planned investments in the financial sector by 50 percent, to €3 billion, this year. That amount is distributed among 30 countries, stretching from Poland to Kazakhstan.
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