UBS does not see the need for panic over Eastern Europe

By Edward Harrison On Feb 18, 2009

FT Alphaville has a post up indicating that the UBS EMEA economics team is much more sanguine about prospects in Eastern Europe than many market participants. The most important part of the UBS contents reads as follows:

We don’t normally respond directly to articles in the financial press, but quite a number of clients have requested clarification on recent reports that Eastern Europe is now facing a financial “meltdown”, and one that threatens to take the stability of Western European banking systems down with it (this theme has suddenly appeared in quite a few articles, including those on gold, commodities and banks, but the one that was forwarded to us most often was “Failure To Save East Europe Will Lead to Worldwide Meltdown“, Daily Telegraph, 17 February 2009).

This is heady stuff, and of course has helped call attention to the state of Eastern European economies (for most economists, the irony here is that all the press notice comes at a time when nothing has really changed in terms of the underlying regional situation; we’ve been writing about Eastern Europe’s problems for a good long time now). However, we need to stress our view that the conclusions above are also highly exaggerated, with at least as much “hype” as hard analysis.