Czech crown firms as aid is pledged for region

CzechNews
27. 2. 2009 14:40
Package to stimulate lending to businesses in central and eastern Europe
Foto: Reuters

London - In a communiqué issued Friday, the world's largest financial institutions presented a plan to stimulate the banking sector and lending activity in central and eastern Europe. The Czech currency sharply strengthened after the announcement.

The European Bank for Reconstruction and Development, the European Investment Fund and the World Bank have earmarked a total of EUR 24.5 billion.

Described as a catalyst of the region's economic recovery, the aid is designed to encourage lending mainly to small and medium-sized businesses and to mobilise local financial resources.

Markets in the Czech Republic welcomed the announcement, with the Czech currency firming sharply under CZK 28/EUR and to around CZK 22/USD in the morning. The crown lost some of the gains after lunch.

The promise of a financial infusion appears to be coming at the right time. Investors, who view central and eastern Europe as one homogeneous region that is now getting increasingly risky, have been recently pulling out their investments, undermining local currencies and stocks.

"Since the last significant fall of local currencies in our region was connected precisely with fears of a growing risk of insolvency, this announcement is certainly positive news," said Patria Online analyst Tomáš Vlk for the ČTK news agency.

 

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