EBRD President Sir Suma Chakrabarti has launched an urgent call for a Ukraine deal with the IMF to be wrapped up in February, saying the country was in acute need of support.
In a series of discussions as well as media interviews at the World Economic Forum in Davos, Sir Suma pointed to the five per cent slump in GDP that the EBRD expects for this year and another escalation in the violence in Ukraine as particularly worrying signs.
An IMF deal next month was crucial, Sir Suma said, adding that the EBRD would be part of any international response to the crisis.
Asked in an interview why the EBRD was not pulling away from Ukraine because of the economic situation, he said: "we are not cutting back our exposure because we are a development bank."
In the longer term, Sir Suma looked ahead to a more positive future for Ukraine, with its huge potential especially in agriculture and its skilled work force.
But it would take five to 10 years to achieve that potential, he said. It was also crucial that Ukraine continued to roll out much needed reforms.
Also on the agenda of his high level discussions in Davos was the collapse of the oil price and the damage it was inflicting not just on Russia but on whole swathes of eastern Europe that are dependent on Russian economic stability.
The European Central Bank announced today that it was launching a programme of quantitative easing to breathe life back into a eurozone beset by stagnation and the risk of deflation.
The announcement is also an important step for Central and South Eastern Europe whose economies also depend on the Eurozone for growth.
The Swiss National Bank last week removed its cap on the Swiss franc/euro rate in anticipation of a flood of Swiss franc borrowing in the aftermath of just such a step. The move unleashed a dramatic rise in the Swiss currency that battered Eastern European markets where Swiss franc private loans were perceived to be a major problem.
Speaking at the Davos Forum this week, Piroska Nagy, the EBRD’s Director for Country Strategy and Policy, said markets had probably overreacted to the news. Swiss franc private mortgages, while painful for some individuals, no longer represented the systemic financial risk they had done at the height of the global economic crisis.
Governments in Poland, Croatia and Romania were taking steps to ease the problem in countries where this was a threat, she said.
But last week’s news had underscored the vital need to develop local capital markets to produce home grown sources of capital and reduce the need for risky foreign exchange debt, she added.