Wien, 12.12.2018, 13:55

Ukraine implications for Austrian banks. Escalation of unrest hinders quick exit.

Central Europe is one of the European Union's most astounding success stories. Ten years after accession the region is now a growth engine for the wider EU economy. Nevertheless, the second decade in the EU requires new plans and ambitions. The report calls for the refashoning of the regions's growth model with a focus on an enhancement of its global competitiveness and innovation capacity. Closer ties with Austria and the Nordic-Baltic countries would be especially important in that effort.

Central and Eastern European states became an obvious target for Austrian banks when they began to open to foreign investors following the collapse of communism. The woes of the Eurozone crisis have startet a creeping shift in deposits from southern to northern Europe and Austrian banks may be among those who benefit.

Can recession be avoided? Heterogenous growth performance in CEE; CEE fiscal position clearly better than in the Euro area; Twin problems: solvency and liquidity; A series of rescue packages and several EU summits: But only limited success; The liquidity problem: high refinancing needs; Stability bonds (Eurobonds): Proposals of the EU Commission; Eurobonds: a way out? ECB: lender of last resort for banks - and sovereigns? The solvency problem: a simple analysis of debt sustainability; Can debt levels be stabilized? Considerable spill-overs to the banking system; Bank recapitalizations: risk of accelerating the crisis; Diverging competitiveness: a cruical issue for the solvency problem; What does economic theory tell us? Conclusions.

Interest Rate & Exchange Rate Forecast

Euro USD EXR
Aug 18 0,00 2,00 1,15
Sep 18 0,00 2,25 1,16
Oct 18 0,00 2,25 1,16
Nov 18 0,00 2,25 1,14
Dec 18 0,00 2,50 1,14
Jan 19 0,00 2,50 1,13
Feb 19 0,00 2,50 1,12
Mar 19 0,00 2,50 1,11
Apr 19 0,00 2,50 1,11
May 19 0,00 2,50 1,10
Jun 19 0,00 2,75 1,13
Jul 19 0,25 2,75 1,13

The World Economy

Weight Real GDP growth, %
2011 2017e 2018f 2019f
World 100,0% 3,7 3,9 3,6
USA 19,2% 2,3 2,9 2,7
Euro Area 14,3% 2,4 2,2 1,7
Germany 4,1% 2,5 1,9 1,8
Austria 0,5% 3,1 3,1 2,0
Japan 5,7% 1,7 1,0 0,8
Asia 28,9% 6,5 6,6 6,2
CEE 3,1% 5,8 4,1 3,8

f ... forecast
e ... estimated