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The Last Shall Be the First - The East European Financial Crisis - Anders Aslund

The Last Shall Be the First - The East European Financial Crisis

Paperback Published: 1st October 2010
ISBN: 9780881325218
Number Of Pages: 136
For Ages: 22+ years old

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This book deals with the financial crisis in Eastern Europe that erupted in the fall of 2008 and abated in the spring of 2010. It concentrates on the ten new eastern members of the European Union. The causes of the crisis posed no mysteries. This was a typical credit-driven boom-and-bust cycle that led to excessive current account deficits. When global liquidity dried up, the overheated East European economies faced a sudden stop of financial inflows. What is remarkable is how well these countries have steered out of the crisis.

The worst hit countries-Latvia, Lithuania, and Estonia-refused to devalue their currencies and instead pursued internal devaluations, successfully cutting public wages and expenditures. They swiftly turned large current account deficits into substantial surpluses and minimized their inflation. The political economy of crisis resolution has been equally striking. The public accepted significant hardship with minimal protests. Eastern Europe's fragmented proportional parliaments made it possible to quickly change governments when the incumbents fall short. Unstable coalition governments proved eminently able to pursued resolute anticrisis policies. They carried out impressive fiscal retrenchment without any public reaction against capitalism or globalization. The East European economies have come out leaner and more efficient.

The International Monetary Fund stands out as the great victor on the international stage, having revived the old Washington consensus of a few rudimentary financial conditions, such as tenable exchange rate policy and reasonable fiscal and monetary policy, while it allowed well-governed countries larger public deficits during the crisis and offered much more financing. The European Commission entered into a successful partnership with the IMF, allowing the IMF to take the lead, while providing substantial financing. The great disappointment in the East European financial crisis has been the European Central Bank, which needs to reconsider its policies outside the eurozone to become more proactive.

Prefacep. ix
Acknowledgmentsp. xiii
Mapp. xvi
Introductionp. 1
What Went Wrong and How It Was Fixedp. 4
Maastricht Citeria and Euro Adoptionp. 8
Parallels to the East Asian Financial Crisis of 1997-98p. 10
Structure of the Bookp. 12
Causes and Eruption of the Financial Crisisp. 13
Causes of the Crisisp. 14
Eruption of the Crisisp. 25
Political Economy of Crisis Resolutionp. 31
Hungary: Straightforward Crisis Resolutionp. 33
Latvia: The most Complex Stabilizationp. 35
Romania: All about Politicsp. 38
Lithuania, Estonia, and Bulgaria: Robust Anticrisis Policy without the IMFp. 40
Poland, the Czech Republic, Slovakia, and Slovenia: No Serious Overheating or Crisisp. 42
Fast Financial Adjustmentp. 43
The Exchange Rate Dilemmap. 53
The Baltic Exchange Rate Conundrump. 56
Why Latvia Did Not Have to Devalue Like Argentinap. 60
Multiple Exchange Rate Options Remainp. 65
The Banking Crisis That Never Materializedp. 67
West European Banks Expand in the Eastp. 67
The Vienna Iniativep. 71
International Cooperation in Crisisp. 75
International Monetary Fund: Financial Saviorp. 75
European Union: The Rookiep. 77
European Central Bank: Voldemortp. 78
The United States: Keeping a Low Profilep. 81
World Bank: The Third Fiddlep. 82
A New Pattern of International Financial Crisis Resolutionp. 83
Why Eastern Europe Acted So Responsibilityp. 85
Strong Center-Right Tendency in Electionsp. 85
Causes of Popular Fiscal Restraintp. 87
Eastern Europe and the Fiscal Crisis in the Eurozonep. 91
The Greek Tragedyp. 93
The Greek Rescue Package of May 2, 2010p. 95
The South European Rescue Package, May 9-10, 2010p. 97
East European Lessons Dawn on the Eurozonep. 98
Toward European Convergencep. 103
Outcome of the Crisis in Eastern Europep. 104
EU Convergence or Divergencep. 107
The Last Shall Be the Firstp. 111
Overview of the CEE-10 countriesp. 4-5
Real GDP growth, 2000-10ep. 15
Real GDP decline, 2009p. 15
Current account deficit as share of GDP, 2006 and 2007p. 17
Gross foreign debt as share of GDP, end 2008p. 17
Real effective exchange rate growth, 1999-2008p. 19
International currency reserves as share of imports, end 2008p. 19
Share of foreign currency loans in total domestic credit, 2007p. 20
Monetary expansion, 2004-08p. 21
Inflation, 2007 and 2008p. 22
Budget balance, 2000-10ep. 23
Public debt as share of GDP, end 2008p. 23
Current account balance, 2008-09p. 44
Inflation, 2009 and 2010ep. 45
Average budget deficit, CEE-10 and PIGS, 2008-10ep. 46
Total general government expenditure, CEE-10 and EU-15, 2004-11fp. 46
Total GDP growth, 2000-10fp. 49
GDP per capita in the CEE-10 as share of average Eu-15 GDP per capitap. 50
Public debt as share of GDP, 2000-09ep. 57
Exposure of West European banks in CEE-10p. 71
Unemployment rate, monthly average, January 2008-June 2010p. 105
The ten Central and East European countries (CEE-10)p. 3
Table of Contents provided by Ingram. All Rights Reserved.

ISBN: 9780881325218
ISBN-10: 088132521X
Audience: Professional
For Ages: 22+ years old
Format: Paperback
Language: English
Number Of Pages: 136
Published: 1st October 2010
Publisher: Institute for International Economics,U.S.
Country of Publication: US
Dimensions (cm): 22.9 x 15.4  x 0.9
Weight (kg): 0.22