Austria's government proposed an international effort to save banks in Central and Eastern Europe on Tuesday, as the country's financial institutions are heavily exposed in the region's economies, according to dpa. Chancellor Werner Faymann is expected to discuss the plan with his German counterpart Angela Merkel in Berlin on Wednesday, but countries such as Belgium, France and Italy, as well as international finance institutions, should also be involved in the effort, he said. With a total of 230 billion euros (299 billion dollars) in credits, Austrian banks are the biggest lenders in the CEE region, followed by those from Germany and Italy. The International Monetary Fund (IMF) has warned against a credit crunch in Central and Eastern Europe. The proposal called for countries such as Bulgaria, Romania and the Ukraine to come up with national measures to protect their banks. In addition, the goal was "to raise support from Germany, the EU Presidency and the entire European Union to expand current measures and to be prepared for future relief efforts," such as providing additional liquidity to the IMF, Faymann said. The European Central Bank, the European Investment Bank and the EU's Cohesion Fund could also step in to support banks active in the CEE region, the chancellor said. "There is a risk of a credit crunch that would deteriorate the situation in Central and Eastern Europe," an Austrian banking official whose company is active in the region told Deutsche Presse-Agentur dpa. Currently, lenders were avoiding granting new credits in order to minimize risks, he said. According to the European Bank for Reconstruction and Development (EBRD), economic growth in Central Europe will slow to 1.5 per cent in 2009, from 4.3 per cent last year.
