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14 December 2011
Because eurozone banks are being forced to bulk up their reserves...they may begin a massive retreat from Eastern Europe...which they once viewed as the best region for rapid growth.
With the retreat...goes credit growth...that could further hamper GDP expansion there.
Especially if governments follow Hungary's recent measures to ease the pain of brutal mortgage payments priced in foreign currencies...that could cripple Austrian banks.
“Banks are having to make brutal decisions about where they deploy capital at the moment, and if policy makers make life too difficult for European banks, as in Hungary, then they will more aggressively deleverage in these markets,” said a Royal Bank manager. It’s “obviously bad for credit and growth.”
READ also...E.Europe balks at aiding EU's emergency fund.