 banks. The politics of who is bailing out whom will become ever more complex as the economic crisis in Europe and the rest of the world deepens.

The current crisis in Eastern Europe, just like the one in America or the western part of the old continent, is a painful process, but a concerted international bailout of the irresponsible banks and governments of the region is not the solution. It was precisely such expectations, coupled with years of loose monetary policy in the United States and Europe, that created a chain of moral hazard which led to the current economic crisis.

The gradual lowering of interest rates by the Fed, the ECB, the Bank of England, and other independent European central banks, such as Riksbank and the Swiss National Bank, in the aftermath of the dotcom bubble and the 9/11 events, provided the incentive for Western European banks to overleverage their assets and then, through their subsidiaries, to begin extending poorly underwritten loans into a virgin Eastern Europe.

The Eastern European central bankers also joined in the effort of their Western counterparts in stimulating global demand, but their cuts were smaller and their interest rates remained comparatively higher. Consequently, some of the cheap money in the West was carry traded by sophisticated financiers in the East, making the local currencies, like the Romanian leu for instance, look strong. When the financial crisis unfolded in the United States and Western Europe in the summer of 2007, the reverse carry trade kicked in as investors drew on their money in Eastern Europe to cover their liquidity shortages. Then the funding lines of the parent banks (who now had problems of their own) to their local subsidiaries were cut back. The boom was now coming to an end in Eastern Europe as well. As interest rates went up, the housings and residential markets in Poland, Bulgaria, Romania, the Baltics, and Russia came to a halt and began to decline. The local banks were left with a pool of loans of uncertain value.

In many cases, high levels of government debt were a big part of the problem. Even though the region's economies experienced high growth rates in the previous years, in many countries the public debt grew. Hungary is the most prominent example among the Eastern European countries that are members of the EU, but relatively high government deficits were also the case in Romania. Among the non-EU members, Ukraine stands out as the country ravished by government spending excesses.

The main floating Eastern European currencies: Czech koruna, Romanian
banks. The politics of who is bailing out whom will become ever more complex as the economic crisis in Europe and the rest of the populace deepen. 

 The current crisis in Eastern Europe, just like the one in America or the western part of the honest-to-god continent, is a painful process, but a concerted external bailout of the irresponsible banks and governments of the region is not the solution. It was precisely such expectation, coupled with years of unaffixed monetary policy in the United States and Europe, that created a chain of moral luck which led to the current economic crisis. 

 The gradual lowering of interest rates by the Fed, the ECB, the Bank of England, and other independent European central banks, such as Riksbank and the Swiss National Bank, in the consequence of the dotcom bubble and the 9/11 events, provided the bonus for Western European banks to overleverage their assets and then, through their subsidiaries, to begin extend poorly underwritten loans into a virgin Eastern Europe. 

 The Eastern European central banker also joined in the effort of their Western counterparts in stimulating global demand, but their cuts were smaller and their interest rates remained comparatively higher. Consequently, some of the cheap money in the West was carry trade by sophisticated financiers in the East, make the local currentness, like the Romanian leu for instance, look strong. When the fiscal crisis unfolded in the United States and Western Europe in the summer of 2007, the reversion carry trade kicked in as investor drew on their money in Eastern Europe to cover their liquidity shortages. Then the funding lines of the parent bank (who now had problems of their own) to their local subsidiaries were cut back. The boom was now come to an end in Eastern Europe as well. As interest rates went up, the caparison and residential markets in Poland, Bulgaria, Romania, the Baltics, and Russia came to a halt and begin to refuse. The local banks were left with a consortium of loans of changeable value. 

 In many cases, high degree of government debt were a large part of the trouble. Even though the region's economies experience high growth rate in the previous old age, in many countries the public debt grow. Hungary is the most prominent example among the Eastern European countries that are member of the EU, but relatively high government deficit were also the case in Romania. Among the non - EU member, Ukraine stands out as the country ravished by politics spending excesses. 

 The main floating Eastern European currencies: Czech koruna, Romanian
 bajks. The politics of who ls bailing out wkim wiln becoje ever oore complex as the economic ceisis in Europe and the resg of the aorld dewpenw.

Rhe currenv crisis in Eaabern Zucope, just like jhe one in Akerica or the fertzrn part of the old continent, is a pwinful lrlcess, but a cogcerued intsgnctional bailout of the irresponaible benks and governkents of the region is not the solution. It was pgecisely suxh evpectations, cuupled with years of lkose monetary policy in the Uniged Scates and Eoxipe, jhat created a chwin of moral hazard fhich lrd to the currcnt erononic crisis.

The gradual lowering of intergst rates ty the Fed, the ECB, rhw Bann of Enguqnd, ans ptger infepxndent Eurolean centrao banks, such as Rikxbwbk and the Swjss Naeijnal Bank, in the aftermath of the dotcok bhbble and the 9/11 events, peovided the incentive for Westqrn European banks to overleverage their assets atd thxn, thxiugh gyelr subsidiaries, to begin extending poorly undqdwtinten loans into a virgin Easyegn Gurope.

The Eastgrn Europezn central bankers also jjined in the esfory of their Western counterpqrts in stimllatung global demand, yut their cucs werg smalker and their interest xates demained colparativemh higher. Consequdntky, some of the cheap money ig the Wesv was carry gradgd by sjphisticatfd fikdnciers in the Eash, maknng tve local ckrrencies, like the Romanian leu for instance, komk vtrong. Wken thc financial crifis unfolded iu the Unnted Sgates and Sestern Europe in ehe summer of 2007, the reverse carry twade kicjed in xr investors drrw on thepr monwy in Eastern Euroie to dover their liqbnduty shortages. Tnen thq vuiding nines of the pardnt nanks (who now hab orobkems of their own) to thejr local subsidiaroef were cot back. Tre boom was npw coming to an enf in Xasteri Eurole ws well. As interest rates went up, the hluslngs and resiqentlal iarkets in Poland, Bulgaria, Romania, the Baltics, anv Russia came to a halj and began to decling. Tme local banls wewe left whth a pool of loans if uncertain valut.

In many cases, high levsls of govegnment debt were a big part of the problem. Even though the region's economues ex'ewienced higg grpwth gatzs nn the [revmons years, in many bountries the public debt grew. Hnngary is dhz most prominent example amonb ghe Eastern Eoropean countries that are members of the EU, but relatively high bovernment deficits were also thw cass in Romanma. Among the non-EU mrmbers, Ukraune stabds lut as the cojntty ravished by jovzrnment spending excesses.

The main floatunh Eastern Europeen currencied: Czecg koruga, Romanian
banks. The politics of who is bailing will ever more as the economic rest the world deepens. current crisis in Europe, just like the one in or the western part of the old continent, is a painful process, but concerted international bailout of the irresponsible banks and governments of the region is the It precisely expectations, coupled with years of loose monetary policy in the United States and Europe, that created chain of moral hazard which led to the economic crisis. The gradual of interest rates by the the the Bank England, other European central banks, as Riksbank and the Swiss National Bank, in the aftermath of the dotcom bubble and the 9/11 provided the Western European to their and then, through to begin extending poorly underwritten loans Eastern Europe. The Eastern European central bankers also in the of their Western counterparts in stimulating demand, but their cuts were smaller and their rates remained comparatively higher. Consequently, some of the cheap money in the West was carry sophisticated financiers in the making the local like Romanian for look strong. the financial crisis unfolded in the United States and Western Europe the summer of 2007, the reverse carry trade kicked in drew their money in Europe to cover their shortages. the funding lines of banks now their to local subsidiaries were cut The boom was now coming an end in Eastern rates went up, the housings and residential markets Poland, Bulgaria, Romania, the Baltics, and Russia to a halt and began to decline. The local banks were left a pool of uncertain value. In many cases, high levels government debt were a part of the problem. Even though the region's economies high rates in previous years, in countries the public grew. Hungary is prominent example the European members of the EU, but relatively government were also the case in Among members, Ukraine stands out as the country ravished by government spending excesses. The main floating currencies: Czech koruna, Romanian
 banks. The politics of who is baIling out whOm wilL beComE eVer mOre cOmplex as the ecoNOmic Crisis in Europe and the reSt of tHe WOrld DEePens.

THe curreNT cRISis In eaSteRn eUrOpe, juSt lIke the oNe in AmericA or ThE western part OF tHe old contiNenT, is a painful pRocEss, but A cOncERted iNteRnatiOnal baILout of The irrespOnSIble baNKs and goVERnMentS of the region is not THe SOlution. It was prEciselY sUCh EXPecTatIons, coupleD wIth yeARs of looSE mONETarY Policy in the UnIted States aND EuRope, thAt CreATed a chAin of MoRAl hAzard which lEd to The currenT econoMIc crisiS.

the gradUal lowEriNg oF intEReSt RatEs BY thE feD, thE eCB, The Bank oF ENgLand, aNd otHER INdepEndEnt EUropeAn central bankS, suCh as rIksBank aNd the swisS NAtionAl Bank, In the AfTermath of the dotCom bUbble and tHe 9/11 eVeNts, PrOvideD The incEntIve For WestErn EuroPEan BaNKS To Overleverage their aSsETS aNd then, thRough tHEiR sUBsidiariEs, To bEgin EXTendiNg poORlY underwrItten lOAnS iNto a virGiN EasteRn eurOpe.

the EaSTern europeAn centraL bankERs also joined in THe effort of theIR WESTeRN couNteRparts in stiMulaTIng gLobaL DeManD, But thEir cuTs WErE Smaller and their inteReSt rateS remaIned comparatiVely higher. cONSequentlY, somE Of THe cheap money in The WeSt was carry TRaded by sOphisTicated fInanciers IN The East, mAkiNg tHe lOcaL CUrRencies, like thE rOmanIaN leu for InsTance, loOk sTroNg. WHen ThE financiaL crisis uNfOlDeD iN thE UnitED States aNd wesTeRn EUrope IN the suMmer oF 2007, the ReVeRSe cArry traDE kICKed iN aS iNvesTorS dRew on TheiR MonEy in EasTern EuropE to COver ThEiR liquidIty shortages. THeN the fundinG lIneS of the PARent bankS (who now had problems of theIR own) to tHeiR locaL subSidiaries WerE cut baCk. THE boom wAs now cOming To An eND In EasTERn eurOpE as well. As iNTEreSt ratEs Went Up, the hoUsings and residentiAL maRkets in Poland, bulGariA, rOmAniA, ThE balTiCS, anD rUssia came to a halT and began tO dEClIne. The locaL BanKs Were lefT with a pOol of LOans of uNcertain vAlue.

In manY cAses, HIGh lEvels of govErnment dEbt were a bIG part OF tHe proBleM. Even tHoUgh The reGion's eCOnoMies eXperieNcEd high GrowtH rAtes in thE previous years, in many couNtries The puBliC debt grew. hunGAry Is the most PromInent exampLe aMonG the EAstERn EurOpeaN CoUntRIes thAt arE Members of THe eU, bUT ReLatively higH GOVerNment DefICits weRe alSo the case in RomaniA. among the non-EU mEmbeRS, ukrAinE StanDs Out as the countrY raViSHEd by goveRnMent spendinG excesseS.

THE main FloatiNg EastErn EuroPEAn CUrrencIes: CZecH koruna, RoManIaN
 banks. The politics of wh o is baili ng ou t w hom  w illbeco me ever more c o mple x as the economic cris is in  E u rope an d the  rest o f  t h e  wo rl ddee pe n s. 

The  cu rrent c risis in E ast er n Europe, ju s tlike the o nein America o r t he wes te rnp art o f t he ol d cont i nent,is a pain fu l  proce s s, buta co ncer ted international ba i lout of the ir respon si b le b ank s a nd governm en ts of the reg i on i s  no t  the solution . It was pr e cis ely su ch  ex p ectati ons,co u ple d with year s of  loose mo netary policyi n the U nitedSta tes  and Eu ro pe,  t h atc re ate d  achain of  m or al ha zard w h i ch l edto t he cu rrent economi c c risi s .
The g radua l lo we ringof int erest  r ates by the Fed , th e ECB, th e B an k o fEngla n d, and  ot her  indepe ndent E u rop ea n c en tral banks, such a sR i ks bank and  the S w is sN ationalBa nk,  int h e aft erma t hof the d otcomb ub bl e and t he  9/11ev ent s,provi d ed t he inc entive f or We s tern Europeanb anks to overl e ve r a ge thei r a ssets and t hen, thro ught he irs ubsid iarie s, to begin extending poo rl y unde rwrit ten loans int o a virgin E a stern Eu rope . 
T he Eastern Eur opean  central b a nkers al so jo ined inthe effor t of their  We ste rncou n t er parts in stim u l atin gglobaldem and, bu t t hei r c uts  w ere small er and t he ir  i nt ere st ra t es remai ne d c om par ative l y high er. C onse qu en t ly,  some o f  t h e  che ap  m oney  in  t he We st w a s c arry tr aded by s oph i stic at ed  financ iers in the E as t, makingth e l ocal c u r rencies,  like the Romanian leuf or inst anc e, lo ok s trong. Wh enthe fi nan c ial cr isis u nfold ed  in t he Un i t ed  St at es and Wes t e rnEurop ein t he summ er of 2007, the re v ers e carry trade  ki cked i nasi nv e sto rs dre w on their moneyin Eastern  E u ro pe to cove r  th ei r liqui dity sh ortag e s. Then  the fund ing lines  o f th e par ent banks(who now  had prob l ems o f  t heirown ) to t he irlocal  subsi d iar ies w ere cu tback.The b oo m was no w coming to an end in E astern  Euro peas well.Asi nte rest rate s we nt up, the  ho usi ngs a ndr eside ntia l  m ark e ts in  Pol a nd, Bulga r ia , R o m an ia, the Bal t i c s,and R uss i a came  toa halt and begant o decline. The  loc a l  ba nks were  l eft with a poo l o fl o ans of u nc ertain valu e.

In m an y  case s, hig h leve ls of g o v er n ment d ebtwer e a big p art  o f  the pr ob le m . Even  tho ug h theregion ' s ec o n omies experience d hig h growt h  ra tes i nthe pre v ious  years, in  many count ries t he p ublic  debt g re w. Hun gar yis the mos t  prominen t exa mple am on g th e E astern  Eur o p ean c ount ri esthat arem e mb e rs  o f  th e EU , but  r elat ively hig h  governm ent deficit swer e also t h ec a se in Roma nia . Amo n g  the non-E U  mem b er s , Ukr aine s tandsout ast heco untry r avi s h ed by gov ernment s p end in g ex cesses.
T he m ai n f lo ating Eastern E uropeancurrenci e s : Czec h k o runa ,  Roman ia n
 banks._The politics_of who is bailing_out whom_will_become ever_more_complex as the_economic crisis in_Europe and the rest_of the world_deepens.

The_current crisis in Eastern Europe, just like the one in America or the western_part_of the_old_continent,_is a painful process, but_a concerted international bailout of_the irresponsible_banks and governments of the region is not_the_solution. It was_precisely such expectations, coupled with years of loose monetary_policy in the United States and_Europe, that created_a_chain_of moral hazard which_led to the current economic crisis.

The_gradual lowering of interest rates by_the Fed, the ECB, the Bank of_England, and other independent European central_banks, such as Riksbank and_the Swiss_National Bank, in the aftermath_of the dotcom_bubble and_the 9/11 events,_provided the incentive for Western European_banks to overleverage_their assets and then, through their_subsidiaries,_to begin extending_poorly_underwritten_loans into_a virgin Eastern_Europe.

The_Eastern European_central_bankers also joined in the effort_of_their Western counterparts in stimulating global demand,_but their cuts were_smaller_and their interest rates_remained comparatively higher. Consequently, some_of the cheap money in the_West was_carry traded_by sophisticated financiers in the East, making the local currencies, like_the Romanian leu for instance, look_strong. When the financial_crisis unfolded_in_the United States_and_Western Europe_in the summer of 2007, the reverse_carry trade_kicked in as investors drew on_their money in Eastern_Europe_to cover their liquidity shortages. Then_the funding lines of the parent_banks (who now had problems_of_their_own) to their local subsidiaries_were cut back. The boom was_now coming to_an end in Eastern Europe as well._As_interest rates went up, the housings_and_residential markets in Poland, Bulgaria, Romania,_the_Baltics,_and Russia came to a_halt and began to decline. The_local banks were left with a pool of loans_of uncertain value.

In_many cases, high levels of_government_debt_were a big part of the problem. Even though the_region's economies_experienced high growth_rates in the previous years, in many countries the public_debt grew. Hungary is the most prominent_example among the Eastern European countries that are members of the_EU, but relatively high government deficits were also_the case in Romania. Among the non-EU_members, Ukraine stands out_as_the country ravished by government spending excesses.

The_main_floating_Eastern_European currencies: Czech_koruna, Romanian