Dear pen-l'rs
The following is a report from Radio Free Europe/Radio Liberty, a Federal US
agency established at the height of the Cold War as a propaganda tool of the
West for dealing with Eastern Europe and the Soviet Union. Today it
continues 'sucessfully' to carry on its mission!
Regards,
Greg.
--
WORLD BANK PREDICTS ROUGH YEAR AHEAD FOR MOST EAST EUROPEAN
STATES
by Robert Lyle
The World Bank's top official dealing with Russia and
the other transition states in Central and Eastern Europe
paints a sobering, even daunting, picture of what many in the
region will face over the next year or so.
Johannes Linn, the bank's vice president for Europe and
Central Asia, says the region faces a protracted crisis of
economic, social, and, most recently, security problems,
especially over the next 12 months.
Speaking to reporters in Washington on 25 April, before
the start of this week's annual meetings of the bank and the
International Monetary Fund (IMF), Linn said Russia and
Ukraine especially face serious economic difficulties
"We continue to expect a decline in output and an
uncertain political outlook due to elections that are coming
up this year and next year," he said. "The social situation
in these countries is fragile since incomes are continuing to
decline and social support systems are continuing to weaken.
Poverty is on the rise, in Russia, for example, in our
estimate, almost 20 percent of the population is in extreme
poverty. And we of course also see a situation where
structural and social reforms are incomplete and proceeding
only very slowly and with limited political support."
Hungary, Poland, and the Czech Republic are the good
news, he said, noting that these countries remain relatively
stable and unaffected by the ongoing Russian financial crisis
because of early reforms and strong policies.
But for most former Soviet countries, the impact of that
crisis has been severe and will be felt for a long time to
come, according to Linn. The global economy won't make the
real difference among these nations, he says, it depends on
their own policies and their proximity to Russia.
Asked about the lessons learned from the Asian and
Russian financial crises, Linn said there were many,
including the basics of strong domestic reforms. But one
lesson that was part of Russia's collapse last summer was its
strong defense of currency exchange rates. A major part of
the IMF's last loan drawing for Russia was eaten up in the
Central Bank's attempt to defend the exchange rate of the
ruble. Linn says it is clear now this can lead to severe
crises: "Ukraine is a good example where in fact a rather
sensible management of getting away entirely from a fixed
exchange rate in fact prevented the kind of meltdown we see
in Russia.
"The weakness of banking systems and supervision,
linking this of course also with the exposure of short term
debts, in appropriate foreign exchange positions--again
Russia being a good example--are another important lesson
that we are drawing for much more work and attention has to
be given."
Another significant lesson, according to Linn, is the
danger of a weak social safety net. Very weak social
protection systems are unable to deal with the fallout of
severe economic crisis, he argued, noting that the case of
Russia was particularly bad.
"We had difficulty in engaging the Russians through 1996
in an active dialogue on social reforms," he noted, "and
still have difficulty in Ukraine today. Earlier attention to
social system reforms of social systems and then more
significant action also would have helped in crisis
response."
Linn pointed out that Russia has still not dealt
adequately with its social safety net and the deepening
crisis only makes clearer that Russia cannot afford further
postponement of reform. He said that in a recent study of the
social system in Russia, the bank predicted that the worst of
the crisis is still ahead in the coming 12 months. Next
winter will be the hardest time, said Linn, far worse than
this year.
The bank projects that real personal incomes in Russia
will fall an average of 13 percent through 1999, with the
extreme poverty rate rising to more than 18 percent of the
population, while social expenditures by the government will
fall by 15 percent.
More broadly for the region, Linn said the major lesson
from the crisis has been the necessity of a political
consensus on reforms. He compares the examples of Bulgaria
and Romania:
"Bulgaria has now in fact recovered from a severe
financial crisis only two years ago because in fact it has
pursued a consistent and comprehensive reform and
stabilization process based on a reasonably clear and
sustainable political consensus between the president, the
government, parliament, and wide segments in the population.
Romania, by contrast, has had considerable difficulties that
one can trace back to the lack of political consensus and
difficulty of forming a clear political underpinning for
reform and stabilization.
"Now we're hopeful that in looking forward, Romania can
find a more consensus-oriented reform process, and indeed
Romania is one of the pilot countries for the comprehensive
development framework where we will focus very much with the
leadership and under the leadership of the president, on
trying to build this broader consensus."
The author is a Washington-based, senior RFE/RL
correspondent.
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Copyright (c) 1999 RFE/RL, Inc.
All rights reserved.
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