Following the appeal made by several large European banks* which operate in the New Member States (NMS) to the European Commission and the European Central Bank to extend their policies for easing liquidity shortages and reviving lending beyond the older EU Member States, two members of the Economic and Monetary Affairs committee in the European Parliament, Daniel Daianu (ALDE) and Zsolt Becsey (EPP-ED) welcome the banks' appeal and call for specific support for the economies of the NMSs.

The deepening recession is forcing national governments worldwide to consider monetary and budget policy stimuli as a means to diminish the very severe impact of the economic downturn. Non-eurozone New Member States (NMS), particularly those with already high budget deficits and large current account deficits, are fighting capital flight and speculative attacks against their currencies. They are also confronted with the deleveraging undertaken by major European banks that operate in their economies. Therefore, the leeway for using a budget stimulus out of their own resources is hardly an option, as it is a significant relaxation of monetary policies. Furthermore, the very fast credit expansion in the NMSs during the past decade was driven by EU accession prospects and the total liberalization of the capital account and was undertaken by some of the very banks which are currently deleveraging.

There is increasing evidence that the credit crunch will continue to prevail on international markets and might even be worsened by an intense crowding out effect following massive budget stimulus packages initiated in the US and other major industrialized economies. All these circumstances will very likely make the downturn in most NMSs worse and more lasting unless strong and timely counteraction is taken.

Some NMSs have received assistance from the EU and international financial institutions. The EBRD has taken steps in the right direction, too, and this is to be commended. But more has to be done by the EU, and the European Commission should take the lead in this regard. An overall approach in assisting the banking sectors in the NMSs is needed so that credit lines are not drastically reduced and the collapse of local currencies is avoided. To this end, swifter and more solid action on the part of the Commission is badly needed. The ECB could also play a more consistent role in assisting the central banks of the non-eurozone NMSs.

EU funds and other forms of EU assistance, within the framework of a sui generis "credit enhancement" scheme, are needed in order to fight an expected and significant economic downturn in the New Member States and a severe crippling of their financial systems. Furthermore, Mr. Daianu and Mr. Becsey ask the Commission to devise a clear and consistent policy in order to bolster the financial systems in the NMSs and help them avert a sharp worsening of the economic downturn.

* Unicredit, Intesa Sanpaolo, Erste Bank, Raiffeisen, Société Générale, KBC, Bayern Landesbank, Swedbank, SEB, EFG Eurobank