Hungary: iron curtain to divide Europe b/n rich and poor, collapse E Europe economy [Archive]

1curious

03-02-2009, 09:59 AM

http://www.voanews.com/english/2009-03-01-voa20.cfm

EU Rejects Multi-Billion Dollar Rescue Plan For Eastern Europe

European Union leaders have ruled out a multi-billion dollar rescue plan for Eastern Europe in the face of the global economic crisis, despite warnings from Hungary that the rejection could lead to an economic "iron curtain" across the continent. The announcement followed an emergency EU summit on Sunday at which officials debated ways to tackle Europe's biggest financial crisis in generations.

Ahead of the EU summit in Brussels, Hungary's Prime Minister Ferenc Gyurcsany urged the European Union to show solidarity by establishing a support fund of about $240 billion to help failing economies in Eastern Europe. That was far more than the roughly $30 billion that international institutions agreed on Friday to make available.

Mr. Gyurcsany, whose country is among the hardest hit by the global economic crisis, said his plan could prevent the creation of a new "iron curtain" which, he warned, would "divide Europe" between rich and poor nations.

However, Chancellor Angela Merkel of Germany, Europe's largest economy, made clear she strongly opposes a bailout plan for Eastern Europe.

"The situation is very different in each EU country and aid should be handled on a case by case basis," said Chancellor Merkel. "You cannot compare Slovenia or Slovakia with Hungary. We help countries in need. But I think a one size fits all bailout is unwise."

Despite these frictions, EU leaders reached out to East European member states, saying they would not turn to protectionism to support ailing business sectors.

French President Nicolas Sarkozy recently raised concerns in Eastern Europe when he announced plans to lend French carmakers billions of dollars on the condition that they not close French plants or move operations to "the Czech Republic or elsewhere" where manufacturing costs are lower.

But European Commission President Jose Manuel Barroso sought to allay fears of protectionism.

"In fact, we have discussed specific issues - namely the automotive sector and how it is possible to support the automobile sector by not breaking the rules of the internal market and not seeing national measures that could be detrimental to other countries," said Jose Manuel Barroso.

There were also calls during the summit to make it easier for East European countries to introduce Europe's single currency, the euro.

But Czech Prime Minister Mirek Topolanek, whose country holds the rotating EU presidency, disagreed. His comments were translated by Euronews television.

"Concerning the rules for entering the eurozone, I think the majority of countries agree that it would be an error to change the rules of the game at this time," said Mirek Topolanek.

Since the collapse of communism in Eastern Europe, former Soviet bloc countries have borrowed from western nations to finance their growing economies. But with the global credit crisis, it has become increasingly difficult for these developing economies to raise enough capital to pay their debts.

Sunday's EU summit was the latest in a series of European meetings before the leaders of the "Group of 20" major industrialized nations meet in London next month.

0rphie

03-02-2009, 12:13 PM

I applaud Angelina Merkel.

1curious

03-02-2009, 12:39 PM

I applaud Angelina Merkel.
I find it quite ironic that only several days ago Czech President blasted 'old' Europe. And now we are finding out that 'new' Europe is bagging 'old' Europe for help again.

gazell

03-02-2009, 01:53 PM

Yes, I think, Merkel is correct, but also think Topolanek is talking about keeping to the original plans on entering the eurozone. And not all new Europe is bagging here, it's mostly only this mad face Ferenc, the pride and joy of the country, that's all he knows, keeping the hands out, give us the money, give us the money...

"Solidarity, iron curtain" - the key words there, big words, that's all he knows, no economic policy. good he didn't call them racists, if they don't give the money. And then he wastes it on benefits, pensions, what all those people do in turn is keeping their hands out and then waste it. The latest figure I saw: 1.7 m people keep the 10 m country going, won't happen, will it?

With the debts now being around 76% of GDP recently, the country is very much in the footsteps of Ukraine, give them more loans...

The situation is rather different in most Eastern countries. It is not the financial crisis, that's just cream on the cake, Ferenc would have led the country to bankcruptcy without it, he is talented enough in that.

dindin

03-02-2009, 04:47 PM

i dont get it

perdurabo

03-02-2009, 05:14 PM

I find it quite ironic that only several days ago Czech President blasted 'old' Europe. And now we are finding out that 'new' Europe is bagging 'old' Europe for help again.
it's only PM of Hungary babling about bailouts, both Topolanek and Tusk made clear that they are aginst droping large sums into our economies, and we are aginst some special rules to enter eurozone. "New" Europe isn't one country, "old" Europe isn't one country either (and i hate this old/new divide, for f* sake Czech Reublic, Poland have more than 1000 years of documented written history, and we are called "new" like children by countries that have like 300 years)

daily666

03-02-2009, 05:45 PM

It's funny and tragic at the same time how stupid the media are. The "New Iron Curtain" slogan was made by the Hungarian PM. The majority of EE countries (including Czech Rep., Poland) rejected it in the same manner the "old" EU countries did. Having put in the same bag Latvia with a population of 2.5 million of and Poland with 40 and a completely different economies. When a Hungarian govt. asked IMF for help the idiots in NYC and London panicked and sold the Polish Zloty as well.

The funny part is that the only countries with planned GDP growth instead of recession will be in Eastern Europe.

Angie Merkel has put it right so kudos for her.

1curious

03-02-2009, 06:15 PM

and i hate this old/new divide, for f* sake Czech Reublic, Poland have more than 1000 years of documented written history, and we are called "new" like children by countries that have like 300 years)
I hate it too...but you are a little misguided (again ) as the term “old” Europe vs. "new" Europe appears customary in Polish press.

'Old Europe Isn't Listening'
Others echoed a familiar line: "Old Europe," once again, failed to listen to the warnings of those with first-hand knowledge of Russian treachery. "Old Europe isn't listening to Poles, Lithuanians and Ukrainians. Old Europe doesn't want to anger Russia, ..........." the left-leaning daily Gazeta Wyborcza wrotehttp://www.spiegel.de/international/europe/0,1518,572105,00.html

Get your facts straight. If you are tired hearing about ‘new’/'old' Europe, write to Gazeta Wyborcza.

Once again, a Pole blames others (this time not the Russians but a country "with 300 year history") for something he does not like in stead of reading his own country's papers.

Flagg

03-02-2009, 07:30 PM

The timing for rolling out the Euro couldn't have been better as the tide was coming in and lifting all boats.

Now that the tide is going out.....REALLY going out...I think it will be a question of the weakest links break the chain.

No homogenous, unified continental identity

*Folks from Texas may not like supporting folks in Arkansas, but I think it's safe to say they will put up with it longer and harder than say Germans/French supporting the Baltic States, Hungary, Romania, even Spain.

No cohesive central bank

*Although restricted by agreement, each central bank has to answer to it's respective people......cheating on current account/fiscal deficit agreements has become quite common......Spain and Greece are both far over 10%, and likely to go higher...until they can't

*single interest rate policy is a problem for disparate Europe...it's probably too high in Germany, but too low in Ireland...that's going to give respective people's the sh!ts

No central bond market

*without a central, singular bond market to act as a liquidity shock absorber working in conjunction with a singular central bank authority the EU is like very strong, but brittle steel........it has great strength.....but is potentially very brittle and may not flex well.

A comparison between the US and the EU is somewhat analogous to the US and Soviet Union moonshot programs.

The US has a Saturn 5 rocket

The EU has a N-1 rocket

The Saturn 5 rocket has far fewer "rocket motors"/federal reserve banks to align and syncronize

The N-1 rocket has far more "rocket motors"/respective central banks to align and synchronize

The success of the Saturn 5 rocket compared to the total failure of the N-1 rocket is not just coincidental in this analogy.....nor is the very real risk of both detonating in the world's most expensive financial fireworks display.

In my opinion, the risk of both the US and EU financial systems exploding is incredibly high......with the risk of the EU system exploding being a reasonable bit higher than the US, but it's all academic as one "rocket" blowing up is sure to detonate the other sitting on the pad right next door.

Sufficient

03-02-2009, 07:58 PM

I live in Sweden, a country that annually pays 1.7 billion Euro in membership fee to the European Union. Approximately four million Swedes work for a living and thus doesn't only support other Swedes, but also other Europeans since pretty much every cent of the membership fee is used outside Sweden. That's roughly 430 Euros per working Swede.

I know some of you in the poorer countries may think that we can afford this, maybe even that we should pay even more, but please remember that living here is more expensive than in your countries. It's not like we have our own personal vaults where we can swim in money like Scrooge McDuck. The economic growth in Sweden wasn't built on depth as heavily as in some other countries, so most Swedes will manage just fine, but being out of work is no walk in the park here either when just being able to pay your bills.

Yesterday Sweden's biggest union (Metall) announced an agreement with employeers that they will accept a 20 percent wage drop. This might sound normal but this is unheard of in a socialistic country like Sweden where the unions are very powerful on the labour market. Not even during the crisis in the 90s did they accept this. I guess this just shows how deep the crisis is this time.

Thus, spending even more of our tax money on you guys in Eastern Europe? Not likely, sorry guys. You'll just have to be happy with the billions you already receive. Money that we need ourself, but give you because we are such nice guys.

muck

03-02-2009, 08:05 PM

A 20 percent wage drop?

rofl

Here they've just agreed on 5 percent increase.

Sufficient

03-02-2009, 08:14 PM

A 20 percent wage drop?

rofl

Here they've just agreed on 5 percent increase.

I guess this just goes to show how deep the crisis is this time. Personally I consider the labour unions to be partly guilty for the situation in Sweden. As I said, they are very powerful here, it's more or less like a mafia. Either you join and get their "protection" or you don't get a job. The unions policy have been to rather have few workers with high salaries, instead of more workers with lower salaries. For the state to be able to feed all the unemployed or put them in universities you need to have very high taxes in a system like that. It works during good times but fails miserably during bad times such as these.

In my opinion, the risk of both the US and EU financial systems exploding is incredibly high......with the risk of the EU system exploding being a reasonable bit higher than the US, but it's all academic as one "rocket" blowing up is sure to detonate the other sitting on the pad right next door.

I am no expert on economy, but I don't think the EU economy is that fragile. We might only have one common central bank, but then on the other hand there is one in each member state as well that plays an important role. Amongst else since they get to decide the interest rate (that the banks can loan money for) in each country.

Mr.K

03-02-2009, 08:42 PM

it's only PM of Hungary babling about bailouts, both Topolanek and Tusk made clear that they are aginst droping large sums into our economies, and we are aginst some special rules to enter eurozone. "New" Europe isn't one country, "old" Europe isn't one country either (and i hate this old/new divide, for f* sake Czech Reublic, Poland have more than 1000 years of documented written history, and we are called "new" like children by countries that have like 300 years)

Being old doesn't make you automatically a senior member of an organization.

~~~~

03-02-2009, 09:34 PM

The funny part is that the only countries with planned GDP growth instead of recession will be in Eastern Europe.

I agree. that's quite strange - instead of making benefits in one of the last places that can have a growth in 2009, global economic players flee from our market and thus push us into crisis in an artificial way. and all of this is happening when Polish economy is in excellent condition... can't understand that.

zg18

03-02-2009, 09:42 PM

Sufficient

03-02-2009, 09:49 PM

vodin

03-02-2009, 09:59 PM

This is the answer to all stupids who speak in favor that EU must proceed with faster enlargement on the West Balkan. For example, Croatia is already in bankruptcy and now their politician expect EU to run their economy with fresh capital. EU must first consolidate it self prior to further enlargement.

Flamming_Python

03-02-2009, 10:01 PM

I agree. that's quite strange - instead of making benefits in one of the last places that can have a growth in 2009, global economic players flee from our market and thus push us into crisis in an artificial way. and all of this is happening when Polish economy is in excellent condition... can't understand that.

Same happened with Russia; more investors left it than any other major emerging economy; even while its fundamentals were stronger than most of theirs. At least now the ruble and stock market is stabilising and even registering some growth, as a result of of the huge underevaluations and ultra-cheap assets that have appeared as a result of the crash over the past 6 months.

As for Poland, it didn't suffer as much as Russia initially, and I would think it still has some way to slide before it can start to pick itself up again. The problem is that all the rest of the economies in Eastern Europe are doing very badly, countries with which Poland has plenty of trade with. If Ukraine and Hungary go down, it will effect Poland much worse than Old Europe or Russia for that matter. I think this is at least some of the reason for the Hungarian troubles affecting the Polish zloty.

CPL Trevoga

03-02-2009, 10:47 PM

daily666

03-03-2009, 04:52 AM

Yesterday Sweden's biggest union (Metall) announced an agreement with employeers that they will accept a 20 percent wage drop. This might sound normal but this is unheard of in a socialistic country like Sweden where the unions are very powerful on the labour market. Not even during the crisis in the 90s did they accept this. I guess this just shows how deep the crisis is this time.

Can you give me some reliable source that confirms that? Thanks.

1curious

03-03-2009, 04:55 AM

Correct me if I am wrong, but isn't that growth largely based on export? I used to work for an electronics company that had a manufacturing plant in Poland. The products were only designed in Sweden. Obviously now when people doesn't consume "luxury products" over here due to the crisis the company doesn't invest in more capacity in the Polish plant. I guess they are laying off Polish workers in fact.
Good example. Unfortunately many refuse to acknowledge this even though it's obvious!

The fact of the matter is, the whole idea of the EU was/is based on few fundamental principles: 1/sharing 2/discipline 3/following the rules 4/transparency.

This model worked splendidly for many new members... Spain, Ireland, Portugal.. in a matter of years they went from backward economies to some of the most thriving. There is no secret or a magic potion. The new members of the EU (but only initially) are at disadvantage compared to the established members because they lack(ed) the needed infrastructure and institutions. It takes time, particularly after shaking off the commie-type system. So, it's perfectly understandable that the EE countries would be hit a bit harder and would take a bit longer to get out of the crisis.

Yet, and this is what puzzles me, many of these new members (not all) become impatient and promote divisive political rhetoric and agendas BEFORE the right time. That's where I see Europe's coming troubles.

More patience and less politically charged rhetoric ("iron curtain bla-bla-bla) would serve everyone well. Avoiding admixing Russia-centric politics into purely economic issues would be even better. That's the view from here.

daily666

03-03-2009, 05:11 AM

Good example. Unfortunately many refuse to acknowledge this even though it's obvious?

The fact of the matter is that the whole idea of the EU was/is based on few fundamental principles: 1/sharing 2/discipline 3/following the rules 4/transparency.

This model worked splendidly for many new members... Spain, Ireland, Portugal.. in a matter of years went from backward economies to some of the most thriving. There is no secret or a magic potion. The new members of the EU (but only initially) are at disadvantage compared to the established members because they lack(ed) the needed infrastructure and institutions. It takes time, particularly after shaking off the commie-type system. So, it's perfectly understandable that the EE countries would be hit a bit harder and would take a bit longer to get out of the crisis.

Yet, and this is what puzzles me, many of these new members (not all) become impatient and promote divisive political rhetoric and agendas BEFORE the right time. That's where I see Europe's coming troubles.

More patience and less politically charged rhetoric ("iron curtain bla-bla-bla) would serve everyone well. Avoiding admixing Russia-centric politics into purely economic issues would be even better. That's the view from here.

I agree. But those countries need financing to develop in the same manner as the ones that joined in the 80's. Your examples are only half true though. Portugal and Greece consumed most of the funds they got and didn't invest it. Greece is on the same level of developement as Slovenia or Czech Republic, which joined EU in 2004. Ireland? They are victims of the very same policy EE goes now. Low taxes, cheap labour, very high investemetns from abroad (mosty US IT companies which move from Ireland to Poland as we speak ). Now Ireland will feel the pain line no one in the "old" EU.

Again putting all of EE EU members into the same basket is simply wrong.

As for Poland, the major indexes that drive the economy is export (which was already said) but also internal consumption and building industry (infrastructure and housing). The export is down because of obvious reasons. But the internal consumption is hampered by the international business institutions who withdrew funds from their Polish branches to keep their core institutions afloat. And this is happening in all of The foreign banks are doing everything no to give loans which people and businesess need (because some people defaulted on their loans in USA :roll:). Everyone who runs businesss knows how important the credit lines are, but nowdays the stricken Banks are defaulting on them saying the risk is too high. It seems that (contrary to most opinions- even mine back than) Poland did a good job keeping big commercial Banks in the hands of the state (PKO BP, BOS and partially BGZ).

Also, this is obvious, the currencies of EE are easy targets for speculation these days so it was admitted that Goldman Sachs played down the Polish zloty, than saying "OK it's so low we may stop now". That is a good argument to join the Euro Zone (ERM-2 will be adopted this year) though.

Sufficient

03-03-2009, 06:29 AM

Can you give me some reliable source that confirms that? Thanks.

Union sanctions pay cuts to save jobs

One of Sweden’s largest manufacturing sector unions said on Monday that its members are willing to allow employers to cut wages in order to avoid more layoffs.

The IF Metall (http://www.thelocal.se/tag/if_metall) union (http://www.thelocal.se/tag/union) announced an agreement with the Association of Swedish Engineering Industries (Teknikföretagen (http://www.thelocal.se/tag/Teknikf%F6retagen)) whereby workers could see their pay cut by up to 20 percent.

The exact wage reductions would be decided by companies and local union chapters, and would be combined with periods of furlough and additional training.

“This is no normal reshuffling within the industrial sector, this is an emergency situation,” said IF Metall head Stefan Löfven in a statement.

“We’re now waiting for the government to do its part.”

More: http://www.thelocal.se/17936/20090302/And related:

Swedish economy in 'long, dark winter'

Sweden’s GDP fell by 4.9 percent in the 4th quarter of 2008 compared to the same period a year before.

Between the third and fourth quarters of 2008, Sweden’s economy sank 2.4 percent, according to figures from Statistics Sweden (http://www.thelocal.se/tag/Statistics_Sweden) released on Friday.

“It’s obvious that Sweden finds itself in a very powerful economic slowdown. We’re in a long, cold, dark winter,” said Minister of Finance Anders Borg.

“It’s quite clear that such a reading is correct.”

More: http://www.thelocal.se/17882/20090227/I guess the Swedes will have to continue to pay 1.5-2 billion Euros annually to citizens of other EU countries (not to mention the non-EU foreign aid that adds another 2.5-3 billion Euros) despite the obvious need for the money back home. This seems to be heading fast for a depression not seen since the 1930s.

The reason Sweden needs a lot of money itself despite being a "rich" country is the huge public sector. I think Sweden have one of the biggest public sectors in the world, if not the biggest. Some of it is of course useful, such as health care but I'd say that most of it is just useless ballast. By some reason it always seems to be the socialist/communist countries that have a lot of unecessary jobs in the public sector just to keep people busy.

As an example, after the crisis during the 90s the Swedish universities expanded dramatically (we also have högskolor, some kind of college schools although officially being translated to "universities" in English) that today have more than 300,000 students. The Swedish students are older than the students in any other country and study longer. Guess why? Because there were no freaking jobs even during the "good times". Regarding the car-maker Saab some politicians want to nationalize the company, fully knowing it will cost money since the company itself can't make money, but simply to keep people busy.

In a way I guess this crisis is good. Perhaps it will force the government to reduce some of the ballast. Money doesn't grow on trees, not even in "rich" countries.

joka

03-03-2009, 06:30 AM

I find it quite ironic that only several days ago Czech President blasted 'old' Europe. And now we are finding out that 'new' Europe is bagging 'old' Europe for help again.

I fail to see the irony considering that The Czechs are saying the same thing Merkel is saying; countries will be helped on a case by case basis a sweeping mega bailout isn't the answer. Which really is the consensus in The EU, it's a funny focus you've found.

What's the deal with voanews?

1curious

03-03-2009, 06:38 AM

I fail to see the irony
correct, you fail.:)

What's the deal with voanews?
probably bribed by the Russians..p-) VOA=Voice of America...you know the deal...both plotting behind Poland's back p-)

joka

03-03-2009, 09:22 AM

probably bribed by the Russians..p-) VOA=Voice of America...you know the deal...both plotting behind Poland's back p-)

You don't even make it subtle do you. Perhaps you could explain to me why you think it's acceptable for you as someone who does not live in Europe to try to undercut a process that has by any definition been hugely beneficial for Europe. You see, I fail at understanding this.

Stormz_STA

03-03-2009, 09:29 AM

You don't even make it subtle do you. Perhaps you could explain to me why you think it's acceptable for you as someone who does not live in Europe to try to undercut a process that has by any definition been hugely beneficial for Europe. You see, I fail at understanding this.

Because it is in his government best interest to see Europe divided.

~~~~

03-03-2009, 09:41 AM

Correct me if I am wrong, but isn't that growth largely based on export? I used to work for an electronics company that had a manufacturing plant in Poland. The products were only designed in Sweden. Obviously now when people doesn't consume "luxury products" over here due to the crisis the company doesn't invest in more capacity in the Polish plant. I guess they are laying off Polish workers in fact.

we're quite a big market with 40 millions consumers.
Poland do not rely that much on exportation as for example Czech republic and other small CEE countries. our exportation is responsible for only 40% of our GDP and is not based on mainly one branch like in the case of Russia. we export many different goods, our export is much more varied and thus balanced. but anyway our production is mainly devoted to our domestic market. it means we are not that much dependent on prosperity
outside our market like many other countries. local consumption is what makes us grow the most. till fall '08 all the fundamental data concerning Polish economy were unprecedently good. now it is worse and worse every day. but remember the plague came form outside our country. it looks like noone in the global investment banks cares about that. instead of helping us heal the situation in the region by preserving one of the last markets that are expected to grow this year (which would help both sides: the local market and the investors), they somewhat artificially infest us with their disease.
damn!

i would never thought i will say it, but if things will keep rolling the way they are now, we should maybe rethink our traditional dogmatic alliances... we sit on the same bench with all the other Eastern European countries (including Russia). well, to say the least, it seems we're all treated the same way by the global investors. just as we would be one market and not different countries. it deserves a common response. especially when USA are falling down and the Old Europe obviously wants to show us their back in favor of their own economies.

joka

03-03-2009, 10:21 AM

especially when USA are falling down and the Old Europe obviously wants to show us their back in favor of their own economies.

Could you point me towards the obvious part cause I haven't even figured out the vague part yet.

Eye

03-03-2009, 10:35 AM

Anyway, I think this is a fall of capitalism. A structural collapse of oppressive economic system.

It's definitely not capitalism. Money is made from nothing, huge taxes, almost everything regulated, you have to ask many people for permission before you start your own business, etc. I can see very little traits of capitalism around.

perdurabo

03-03-2009, 10:55 AM

I hate it too...but you are a little misguided (again ) as the term “old” Europe vs. "new" Europe appears customary in Polish press.
http://www.spiegel.de/international/europe/0,1518,572105,00.html

Get your facts straight. If you are tired hearing about ‘new’/'old' Europe, write to Gazeta Wyborcza.

Once again, a Pole blames others (this time not the Russians but a country "with 300 year history") for something he does not like in stead of reading his own country's papers.
Gazeta Wyborcza is piece of crap, they are biggest newspaper here but level of their jurnalism is closer to Pravda, they are like parrots copying everything that is fancy in western europe/usa, and i do write to them few notes monthly(they even printed them 2 times in discussion panel). Oh and by the way this isn't first time you take our discusion to personal level, if you have any problem with mine posts, inform Mods.
EDIT: I have nothing aginst calling us new members.

Sufficient

03-04-2009, 04:51 AM

i would never thought i will say it, but if things will keep rolling the way they are now, we should maybe rethink our traditional dogmatic alliances... we sit on the same bench with all the other Eastern European countries (including Russia). well, to say the least, it seems we're all treated the same way by the global investors. just as we would be one market and not different countries. it deserves a common response. especially when USA are falling down and the Old Europe obviously wants to show us their back in favor of their own economies.

Being treated as a common market is not unique for you guys, its common for the Nordic countries as well and I guess its also common for some other regions in Europe, such as Spain/Portugal and Great Britain/Ireland. It's very simple, there is not much point in putting up another sales office in Lisbon when the same can be achieved from Madrid.

For you Poles we Nordic people are probably more or less the same people, but that's like me saying you guys are the same people. There's differences between our countries and cultures, but investors doesn't care about that as long as they can make a profit. It's as simple as that.

I think those "mini unions" can exist even within EU. For example Denmark, Norway, Sweden and Finland have had a passport free region since 1954 with free movement for goods and labour, and our ministers still meet once a year to discuss common issues. However it obviously becomes a problem if such clubs are used in the EU to favor the own regions. That would make it a farce like the Eurovision Song Contest where the eastern Europeans only vote for their neighbours. I don't mind seeing you create your own club, but if doing so please do it with respect for the European Union as a whole. This especially considering that we still give you guys billions each year.

~~~~

03-04-2009, 06:07 AM

Being treated as a common market is not unique for you guys, its common for the Nordic countries as well and I guess its also common for some other regions in Europe, such as Spain/Portugal and Great Britain/Ireland. It's very simple, there is not much point in putting up another sales office in Lisbon when the same can be achieved from Madrid.

For you Poles we Nordic people are probably more or less the same people, but that's like me saying you guys are the same people. There's differences between our countries and cultures, but investors doesn't care about that as long as they can make a profit. It's as simple as that.

I think those "mini unions" can exist even within EU. For example Denmark, Norway, Sweden and Finland have had a passport free region since 1954 with free movement for goods and labour, and our ministers still meet once a year to discuss common issues. However it obviously becomes a problem if such clubs are used in the EU to favor the own regions. That would make it a farce like the Eurovision Song Contest where the eastern Europeans only vote for their neighbours. I don't mind seeing you create your own club, but if doing so please do it with respect for the European Union as a whole. This especially considering that we still give you guys billions each year.

it is not about cultural differences but economic ones. our economies vary a lot. there are small markets (like the baltic countries) and big markets (like Russia or Poland), there are countries with full developed capitalism (like Czech Rep) and ones that are still stuck between communism and capitalism (Ukraine). there are countries members of the Eu and countires that are outside of it. there are countries that rely mostly on services sector, countries that rely more on agriculture, countries that rely on natural resources. there are countries that have quite big internal markets and small ones that rely on exportation. all those countires have different fiscal policies, public debt level and so on.

despite all of this we're being put in one investment basket.
I don't think it gives any advantages to whoever.

Eye

03-04-2009, 12:06 PM

For you Poles we Nordic people are probably more or less the same people, but that's like me saying you guys are the same people.
Not since the "Iceland's case".

ting

03-04-2009, 01:02 PM

it is not about cultural differences but economic ones. our economies vary a lot. there are small markets (like the baltic countries) and big markets (like Russia or Poland), there are countries with full developed capitalism (like Czech Rep) and ones that are still stuck between communism and capitalism (Ukraine). there are countries members of the Eu and countires that are outside of it. there are countries that rely mostly on services sector, countries that rely more on agriculture, countries that rely on natural resources. there are countries that have quite big internal markets and small ones that rely on exportation. all those countires have different fiscal policies, public debt level and so on.

despite all of this we're being put in one investment basket.
I don't think it gives any advantages to whoever.

Your currencies are being put in the same investment basket because they are small. Only Euro dollar and yen are "safe". One euro bought you around 7 Norwegian krone before the crisis, 10 at the beginning of January and now around 9. Capital flows are impersonal and usually defy conventional wisdom.

As long as the new Eu members allow their currencies to go with the flow, it should be ok. Those who have loans in a foreign currency, will have to soldier on however.

Mackie

03-04-2009, 01:35 PM

http://i279.photobucket.com/albums/kk143/xMackiexl/iamge1.jpg

Fall of industrial production, December compared to November 2008.
Yellow: Export in % of GDP

~~~~

03-04-2009, 07:08 PM

http://i279.photobucket.com/albums/kk143/xMackiexl/iamge1.jpg

Fall of industrial production, December compared to November 2008.
Yellow: Export in % of GDP

here it even says Polish exportation is only 33% of our GDP. compare it to Czech and Slovak datas. when it comes to me, I see it as a proof that we have a 40 mln people internal market that can feed itself and evolute that way more than our CEE neighbours. we've had a constant grow since 1992 (6,5% in 2007, 5,5% in 2008) with such a importation/exportation ratio toward GDP size. and now with the external funds being flown away and western banks (which means the majority of banks in Poland) having stopped giving loans, our economy simply dries. while it could easily go back to where it was in fall 2008 (minus off course some losses on exportation).

As long as the new Eu members allow their currencies to go with the flow, it should be ok. Those who have loans in a foreign currency, will have to soldier on however.

"ok" for who? I have a 35 years long mortgage loan in foreign currency. with the current "go with the flow" I must give back to the bank in our local currency almost twice the sum that I borrowed from them just one year ago. the monthly instalments are much higher too. and those bank bastards don't even redistirbute all this ****load of money they receive every month from zillions of people like me and from companies that are stuck in foreign currency loans. they stopped any funds for our market ans instead they send our money to the West to help their head offices.
believe me, it is far from being ok. I know all of this is happening "de jure" and is legal according to the law. but the truth is that we're being now sucked by the West. that ain't good if we want to stay friends as we used to be in the past. that's my opinion.

Flamming_Python

03-04-2009, 07:27 PM

here it even says Polish exportation is only 33% of our GDP. compare it to Czech and Slovak datas. when it comes to me, I see it as a proof that we have a 40 mln people internal market that can feed itself and evolute that way more than our CEE neighbours. we've had a constant grow since 1992 (6,5% in 2007, 5,5% in 2008) with such a importation/exportation ratio toward GDP size. and now with the external funds being flown away and western banks (which means the majority of banks in Poland) having stopped giving loans, our economy simply dries. while it could easily go back to where it was in fall 2008 (minus off course some losses on exportation).

Problem is, the same financial system that has now failed and is affecting Poland through the lack of credit, is the same system that led Polish growth since the fall of the Iron Curtain, when credit was widely available for projects that otherwise wouldn't be able to get off the ground. You can't have your cake and eat it too.

As I said before, Eastern Europe's troubles are also Poland's troubles, Poland's neighbours going down will severely damage some of Poland's largest trade incomes. And by that I don't only mean direct exports, but also the business activities, joint ventures and expansion of Polish companies in neighbouring countries, lack of return on investments in foreign markets, etc...

Fair enough the internal market is substancial, but a country cannot run by it's internal market alone, people's incomes have to come from somewhere. I would presume the highest contribution to incomes in Poland would have come from Financial services, International trade and Industrial exports, all 3 of which have been hit severely by this crisis.

Without the availability of cheap credit, new business have a very hard time starting up, and it's a lot more difficult for existing business to modernise and expand; instead they will fall deeper into trouble and will be forced to lay off workers and lower pay. With incomes going down, people will be far less likely to spend and will be much more likely to save money instead; damaging businesses and reducing the internal market.

A great amount of Polish workers laboured in Europe, especially in England. When their labour markets contracted, a lot of Poles found themselves out of work and unable to send more money to their families. Instead they are now returning home; where there are fewer jobs available as well, causing an increase in unemployment while increasing the financial demand on the Government's social services and lowering the average wages even further via a greater availability of working age manpower (again leading to another contraction of the internal market).

While any one of these factors by itself may not have done a great deal of damage by itself; everything is interconnected in economics and each trouble has a knock-on effect on everything else. What started out as a problem in America has already reached Poland on every level. In this light you cannot seriously expect the Polish economy to have gotten away with only a slight fall in exports; especially when much of the ongoing expansion & development of businesses, high wages and internal market was a result of that international credit being available; and of course now it isn't.

1curious

03-05-2009, 04:11 AM

While researching some aspects of German bonds issued a while back and how they would fit into the current economic crisis, I came across a controversial CIA study on European Union future as seen in 2005.

The interesting task was to compare those pessimistic predictions to what we know NOW, as the crisis is gaining momentum. It seems some CIA-predicted challenges to the EU cohesion were spot on, few were way off. I’ll spare my own comments at this point and will refer those interested to the sources and some insightful discussions. Any student of these issues should find it fascinating.

The original article source:
http://news.scotsman.com/europeanunion/CIA-gives-grim-warning-on.2595505.jp

Some insightful discussion dating back to 2005:
http://www.metafilter.com/38797/CIA-Predicts-European-Union-Will-Break-Up-Within-15-Years

A select comment that seems particularly relevant knowing what we know NOW:

‘But what will happen when smaller members need or want to violate the agreements? If they are allowed to do so widely, then fiscal instability will drag down the EU. IF they are forced to live up to the agreements they will be tempted to leave the union, or perhaps provoke a crisis that brings the whole edifice to the brink of collapse.

ting

03-05-2009, 05:05 AM

"ok" for who? I have a 35 years long mortgage loan in foreign currency. with the current "go with the flow" I must give back to the bank in our local currency almost twice the sum that I borrowed from them just one year ago. the monthly instalments are much higher too. and those bank bastards don't even redistirbute all this ****load of money they receive every month from zillions of people like me and from companies that are stuck in foreign currency loans. they stopped any funds for our market ans instead they send our money to the West to help their head offices.
believe me, it is far from being ok. I know all of this is happening "de jure" and is legal according to the law. but the truth is that we're being now sucked by the West. that ain't good if we want to stay friends as we used to be in the past. that's my opinion.

First of all I symphatize with your increased bill. However this situation will not last that long. If you are able to keep paying you are fine. If you are unable to keep paying you should attempt to make a deal with the bank to defer some payments.

As for the money market. Why shouldn`t the banks do with their funds what they deem to be their best option? The money they get from you is used to cover losses they have on the books. The availability of financing in zloty is controlled by the Polish central bank, so they should attempt to increase the availability of financing in zloty.

Also everybody is being sucked dry, some more than others. The financial crisis is making it harder for everybody to get financing.

perdurabo

03-05-2009, 06:45 AM

and now with the external funds being flown away and western banks (which means the majority of banks in Poland) having stopped giving loans,

nope loans are here still on market, noone stoped giving them its only BS created by our media, only one thing changed in loans banks don't give 100% loan on your investment, you have to have around 20% of your own money.

"ok" for who? I have a 35 years long mortgage loan in foreign currency. with the current "go with the flow" I must give back to the bank in our local currency almost twice the sum that I borrowed from them just one year ago.
you should have thought about it before you have taken loan in foregin currency, there is rule in taking long term loans take them in currency you get your paychecks.

Mr.K

03-05-2009, 04:29 PM

Why is it considered normal and acceptable, to have everything driven by "credit", and then pay twice the amount for the good or service that you get, and feed a parasite with your hard earned money.
You got some serious balls (or incredible job security) for signing a 35 year mortgage.

Reminds me when i went to the bank to put some money in my pension fund. The "advisor", advised me to invest in Mutual funds, and to take a loan. I almost burst from laughter. As if these people don't realise that we're in a downtrend (Dow dropped another serval hundred points) and as if i'm stupid enough to take a loan on money that i want to save for retirement.
"Yes, but then it will all go back" she said. "When it will go up, i'll give you a call" I answered.
Bankers...

~~~~

03-05-2009, 09:09 PM

nope loans are here still on market, noone stoped giving them its only BS created by our media, only one thing changed in loans banks don't give 100% loan on your investment, you have to have around 20% of your own money.

it is just theory. 80% of LTV (Loan To Value) means no loans anymore for Mr Kowalski.
tell me how long will it take you to gain your 20% with circa 9000-10000 PLN average price for a square metre in Warsaw and an average salary around 2500 PLN net?

the second thing is that banks are now much more restrictive in estimating one's loan ability. it means you may not be able anymore to get a place for living. you'll have to rent it instead from someone. landlords already know it and increase their prices.

the third thing is that there are almost no loans in CHF available any more on the market.
Swiss central bank interest rate is now about 0,5% and Polish central bank interest rate for loans in our currency is 4%. it means the installments indexed to Polish zloty are much higher than the the ones for the same hypothetical loan but indexed to swiss currency (despite even the astonishingly high CHF rate)

and last but not least, AFAIK there is only one Polish bank left in Poland (PKO BP). all the others have been sold to western companies some time ago. now those companies send all the money back home.

you should have thought about it before you have taken loan in foregin currency, there is rule in taking long term loans take them in currency you get your paychecks.

yeah, sure... now when **** happened, everyone is an expert on economy. just take a look at any Polish internet forums...
anyway, I was aware of such a risk but come on... twice my initial debt after just a couple of months? that's crazy, man!

Why is it considered normal and acceptable, to have everything driven by "credit", and then pay twice the amount for the good or service that you get, and feed a parasite with your hard earned money.

because so far it was the basis of any progress in economy. buy today something that will help you evolve and pay for it later. at the end you'll pay let's say twice the original price but thanks to that purchase you'll be at that time 3x more wealthy.
banks are not parasites in a healthy economy. they are catalysts. it is only now they turned into parasites...

You got some serious balls (or incredible job security) for signing a 35 year mortgage.

I have both. so far at least.
unfortunately I spend some 2/3 of my today's wages for installments and a dedicated reserve for the future... luckily for me I have a reserve for over one year payments at the moment. but hell knows how long all this situation will last... or when will I loose the several jobs I have now.

Reminds me when i went to the bank to put some money in my pension fund. The "advisor", advised me to invest in Mutual funds, and to take a loan. I almost burst from laughter. As if these people don't realise that we're in a downtrend (Dow dropped another serval hundred points) and as if i'm stupid enough to take a loan on money that i want to save for retirement.
"Yes, but then it will all go back" she said. "When it will go up, i'll give you a call" I answered.
Bankers...

Banksters ;-)

Flagg

03-05-2009, 09:30 PM

it is just theory. 80% of LTV (Loan To Value) means no loans anymore for Mr Kowalski.
tell me how long will it take you to gain your 20% with circa 9000-10000 PLN average price for a square metre in Warsaw and an average salary around 2500 PLN net?

the second thing is that banks are now much more restrictive in estimating one's loan ability. it means you may not be able anymore to get a place for living. you'll have to rent it instead from someone. landlords already know it and increase their prices.

the third thing is that there are almost no loans in CHF available any more on the market.
Swiss central bank interest rate is now about 0,5% and Polish central bank interest rate for loans in our currency is 4%. it means the installments indexed to Polish zloty are much higher than the the ones for the same hypothetical loan but indexed to swiss currency (despite even the astonishingly high CHF rate)

and last but not least, AFAIK there is only one Polish bank left in Poland (PKO BP). all the others have been sold to western companies some time ago. now those companies send all the money back home.

yeah, sure... now when **** happened, everyone is an expert on economy. just take a look at any Polish internet forums...
anyway, I was aware of such a risk but come on... twice my initial debt after just a couple of months? that's crazy, man!

because so far it was the basis of any progress in economy. buy today something that will help you evolve and pay for it later. at the end you'll pay let's say twice the original price but thanks to that purchase you'll be at that time 3x more wealthy.
banks are not parasites in a healthy economy. they are catalysts. it is only now they turned into parasites...

I have both. so far at least.
unfortunately I spend some 2/3 of my today's wages for installments and a dedicated reserve for the future... luckily for me I have a reserve for over one year payments at the moment. but hell knows how long all this situation will last... or when will I loose the several jobs I have at the moment.

Banksters ;-)

I'm definitely empathetic to your difficult situation......

A similiar thing(borrowing unhedged in a foreign currency) occurred down here in New Zealand in the 80's.

It was one significant factor in the economic devastation that occurred.

Unfortunately, I believe it could potentially get far worse before it eventually gets better.....especially in Eastern Europe. :(

In regards to your example of far, far overpriced property and property rentals I think you will very soon find the sale/rental valuations that have defied gravity will soon have to adhere to the basic laws of economic physics.

I believe that for most economic climates a multiple of 3-5 times the average local wage can be maintained......anything under is a screaming buy over time......anything over is a screaming sell over time......rents sort themselves out accordingly.

This massive volatility on the way up had people thinking they would become rich by simply owning the house they live in....on the way down it becomes a debt slave's prison for many.

I wish you luck going forward, but I am particularly concerned that your region is fast becoming the spark which lights the next fire.

~~~~

03-05-2009, 11:09 PM

I believe that for most economic climates a multiple of 3-5 times the average local wage can be maintained......anything under is a screaming buy over time......anything over is a screaming sell over time......rents sort themselves out accordingly.

you maybe right with such a guess (I don't really know what is the average wage/flat sqm ratio on other markets) but we live here and now. sometimes you cannot wait till things go change...
you know, flats may be a good business for people that see things the way you described them, and are rich enough to make profits of it, but first of all, flats are an essential need for every single family. it's almost like bread.
not everyone has an economic awareness to act cautiously in such an environment...
"LTV", "GDP", "interest rates", "currency risk", blah blah blah...
I am quite educated (at least I feel like I am) so I can blame no one but myself for the risk I took (even if i couldn't know it will turn soon into something more like a russian roulette) but many simple bread eaters have signed deals with institutions that treat their essential need to own a flat like nothing but a cynic business. the loan contracts people are being given to sign, are plenty of vague (at first sight) legal sentences that are aimed to give the bank a dominant position at the expense of their client (unaware in most cases of all the hidden risks he's taking responsability of).

I know it is probably a little the same case everywhere, but if things will follow the way they do now, if common people will start loosing their flats, jobs and meanwhile will be pushed to pay some astronomic debts for life... well, I feel it will end badly. I wouldn't be surprised to see a war in a (wealthy so far) place you'd never think of. just wait to see the local nationalisms to re-appear on the political scenes of the developed countries right after social frustration in their societies...

BTW: thank you for your kind words, Flagg and Ting. luckily for me it is not that bad yet.
I have more work than I used to have anytime before (just like there wouldn't be any crisis. hell knows why). what pisses me off for now, is that I'm stuck in a situation when I must pay installments for 2 ground properties I bought and where I cannot build anything without another loan. I was to erect a house for me and another one for my elder retired parents that rely on me.
now I cannot receive the second loan to start the construction and I must pay installments (every month higher and higher with the booming CHF rate) for 2 parcels that I can do nothing with. and I cannot resell them now, because I won't get the price I paid for them. meanwhile I do also have to pay for the flat I rent. and I don't know how long will all of this last... I feel quite insecure. shieet.

~~~~

03-06-2009, 12:19 AM

Problem is, the same financial system that has now failed and is affecting Poland through the lack of credit, is the same system that led Polish growth since the fall of the Iron Curtain, when credit was widely available for projects that otherwise wouldn't be able to get off the ground. You can't have your cake and eat it too.

you're absolutely right. but last fall, when investors started fleeing from our market, Poland has had a booming healthy economy that would probably not be affected that much by the global crisis because of its low export to GDP ratio, quite big internal market and our own local currency that allows our central bank to keep an autonomous monetary policy in spite of the Eurozone falling now into the dark. also the unprecedently big (and stable) funds from the EU scheduled to be spent on infrastructure till 2013 where a good prognosis for the future. all the macroeconomic fundamentals where unprecedently good.
when investors started fleeing Poland was still able to give a good return on investment and has had a relatively good perspective in that matter for the future. the only thing was to keep fueling it with investments. now when the investors are gone our economy dries and our fundamentals and worse and worse everyday. the other bad thing is that AFAIK you cannot get access to many EU funds without your own co-financing. in most cases municipalities and companies have had to get loans to cofinance their part. now, when the loans are gone, we cannot even get many of the scheduled funds from the EU.
we have a proverb in Poland that says: you don't kill a goose that lays golden eggs. unfortunately this is what foreign investors and banks have done to Poland.
once again one can say: "don't forget about Poland" ;-)

Sufficient

03-06-2009, 12:28 AM

I must pay installments (every month higher and higher with the booming CHF rate) for 2 parcels that I can do nothing with. and I cannot resell them now, because I won't get the price I paid for them.

Why not sell them now and take the loss? Atleast you get rid of them and get some money back. I don't think this crisis will end anytime soon and thus it might be good to cut the costs while you still can.

Perhaps it will start getting better from 2011 as some predict, but it will take a looong time before we get back to the booming times we just experienced. It took almost six-seven years (here) after the former crisis in the 90s before things got better. Then due to the booming IT industry.

Or you can rent them to someone and become a landlord yourself?

~~~~

03-06-2009, 11:11 AM

Why not sell them now and take the loss? Atleast you get rid of them and get some money back. I don't think this crisis will end anytime soon and thus it might be good to cut the costs while you still can.

Perhaps it will start getting better from 2011 as some predict, but it will take a looong time before we get back to the booming times we just experienced. It took almost six-seven years (here) after the former crisis in the 90s before things got better. Then due to the booming IT industry.

Or you can rent them to someone and become a landlord yourself?

my debt is now almost twice it was one year ago. If I would sell my parcels now, I would stay with almost the same debt as I have had one year ago but without any property as a counterbalance. and with a 35 years long perspective of paying for absolutely nothing.
it won't work.
I cannot become a landlord myself because I own a parcel, not a flat. why would anyone like to rent a parcel outside Warsaw? I must soldier on (although I'm not in the military ;-) )