A Serious Case of Eastern Overdose

An article in the FOCUS News Agency says, quoting respectable economists, that for Eastern Europe the crisis is just beginning. The economies of the Eastern states, renowned as a source of cheap labour and lucrative speculation, are shrinking at light-speed and the party is over.

But the boom in property prices in some of these places (notably Bulgaria's Black Sea coast or Romania's capital Bucharest) was to some extent due to foreigners who bought properties on the cheap, probably mistaking the word "convergence" for "prosperity".

There are still some investors who hope that Eastern Europeans earning less than 12,000 euros per year will still find ways to pay for a 40-year mortgage with a 30% annual interest rate on a 56-square metre one-bedroom flat on the fringes of a big city with the modest price tag of 150,000 euros.

"In Western Europe there is addiction to the East because it is there where big profits are," Debora Revoltella, UniCredit Group CEE Chief Economist, said, quoted by FOCUS.

You don't say. I so have the feeling that the past tense would be more appropriate for this phrase. Forget about luring them into paying 30% interest rates on money borrowed by Western banks abroad for a mere 5%. They can no longer afford it; or, even if they could, now they know better.

As for where the big profits went, judging by the state of the economies in the Eastern EU, that's not the place. Maybe they were put into the banks' off-balance sheet special deposit vehicles. After all, it's not very trendy to show off your wealth in the middle of a crisis.