Hungary Seeks $230 Billion Package for Eastern Europe

[Joanne98]

Feb. 27 (Bloomberg) -- Hungarian Prime Minister Ferenc Gyurcsany wants the European Union to arrange a package of as much as 180 billion euros ($230 billion) to help east European economies, banks and companies weather the financial crisis.

A “European Stabilization and Integration Program” would include short-term financing for governments, coordinated restructuring for private debt, the recapitalization of banks and liquidity for companies in as many as 12 countries, Gyurcsany, 47, said in an interview in Budapest yesterday. He will present the plan at a March 1 EU summit in Brussels.

Some eastern European economies are in meltdown as the global crisis throttles demand for their exports while credit and investment evaporate. Hungary, Ukraine, Latvia, Serbia and Belarus have sought international bailouts. Regional currencies, stocks and bonds have plunged as investors fled riskier assets.

“We must reduce the region’s risk and that won’t happen with words alone,” Gyurcsany said. “The EU must take a lead role. This package can surely stop the quick depreciation of national currencies, which is the biggest risk in the region right now. We must raise awareness of the region’s challenges and build a framework for coordinated action”

Currencies Gain

The forint rose 1.3 percent to 297.95 per euro by 10:12 a.m. in Budapest, Poland’s zloty gained 0.6 percent to 4.6810 a euro and the Czech koruna advanced 0.3 percent to 28.097 against the EU’s common currency.

The zloty has dropped 29 percent against the euro in the past six months, the forint has fallen 20 percent, the Romanian leu has declined 17 percent and the Czech koruna has lost 12 percent. The Ukrainian hryvnia has plunged 37 percent since August.

To help mitigate currency risk, Gyurcsany is also proposing faster euro adoption for eastern EU members. While economic terms including controlling inflation rates and budget deficits shouldn’t be eased, the time needed to spend in the pre-euro test of currency stability known as the exchange-rate mechanism could be shortened from the current two years, he said.

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