Comissioner Joaquín Almunia has said recently that eurozone-member countries, which face big difficulties, could benefit from assistance from other EU members. Why this indication of collective response is not firmly signalled to non-eurozone NMSs?

Arguably, there is something wrong with the assistance packages extended to Latvia and Hungary. Reducing very large imbalances is, fundamentally, sound. But how this is done does matter to the utmost. Are budget deficits to be compressed drastically while the private sector is cutting its activity dramatically? Pro-cyclicality has to be averted both during an upswing and a downswing.

If public budgets are not the main explanation behind large external deficits, why should they bear the brunt of downsizing them? Just remember the lessons from the Asian crisis, a decade ago. Policy also has to think about how to discourage speculative attacks against the currencies of NMSs. Just by cutting budget deficit drastically would not help much in this regard either.

Hopefully, future Ecofin meetings would enhance better approaches regarding financial assistance. And, whenever the IMF is brought on board in assistance packages it should consider the suitability of its traditional approach in dealing with macroeconomic imbalances in view of the extraordinary current circumstances.