CASE concluded a DG ECFIN study on the effects of the global crisis on the financial sector in candidate and potential candidate countries

The main objective of the study was to increase the understanding of how the international economic and financial crisis affected the financial sectors of the EU candidate and potential candidate countries.

CASE experts, Marianne Schulze‐Ghattas, Przemyslaw Wozniak, Malgorzata Markiewicz‐Bogov and Canan Yildirim, found that emerging market countries as a group endured the global financial crisis relatively well. However, one region was more adversely affected than others: emerging Europe. Experts examined two factors which account for the heightened vulnerability of countries in this region.
First, large external imbalance entailed the risk of a sudden stop crisis triggered by a decline in capital inflows, which had financed large current account deficits. Second, predominantly foreign‐owned banking systems in emerging Europe were vulnerable to adverse spillovers from troubled parent banks. These vulnerabilities were particularly pronounced in the candidate and potential candidate (CPC) states.

The objective of the report was not to predict crisis but rather propose a monitoring framework, which consists of a set of indicators high lightening exposures to shocks and shock absorbing buffers in the financial system, and vulnerabilities in the external and public sectors.
Some of the indicators capture channels of cross‐sector spillovers. The framework is intended to complement the existing macroeconomic monitoring system, which should form an integral part of a comprehensive assessment of crisis vulnerabilities.

The full report will be published soon and announced at CASE website.