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Slowing Exports, High Debt Shake Central and Eastern Europe

Bad loans could mean trouble for western European lenders. Hungary’s prime minister is calling for $230 billion in aid for weaker E.U. members. Transcript of radio broadcast:

This is the VOA Special English Economics Report.

Leaders of the European Union met Sunday in Brussels to discuss measures to deal with the world financial crisis. But the emergency meeting showed growing divisions between western European countries and newer members of the European Union.

Economies in central and eastern Europe have been hit hard by the worldwide credit crisis and less demand for exports in western Europe.

Hungary's prime minister, Ferenc Gyurscany, has called for two hundred thirty billion dollars in aid for the weakest of the twenty-seven members of the European Union. The leader of Europe's biggest economy, however, opposes such a large plan. German Chancellor Angela Merkel has suggested targeted aid for a few countries instead.

The European Union and the International Monetary Fund have already lent Hungary twenty-five billion dollars. Latvia received more than nine billion from the I.M.F. in December. But demonstrations fueled by the economic crisis led the Latvian government to resign last month.

The World Bank and two European development banks agreed last week to provide up to thirty-one billion dollars in aid to central and eastern Europe. A main concern is that the failure of some banks or governments to pay their debts could send a financial shock across many countries.

The effects could reach beyond central and eastern Europe. Banks in Austria, Italy and Sweden that expanded into the area during good times are now in danger of heavy losses.

Even in countries outside the euro area, like Hungary and Poland, businesses and individuals often borrowed in euros. Lower interest rates made euro loans a good deal at the time. Now, those loans have become more costly as local currencies have lost value. Chances are greater that foreign currency loans in some countries will not be paid back.

But some of the central and eastern economies in the European Union are in relatively good health. Poland is the biggest and its economy is less dependent on exports. The Czech Republic is also considered in a better position. The Czechs currently hold the E.U. presidency.

On Wednesday, banking supervisors from the Czech Republic, Slovakia, Poland, Romania, Bulgaria and Hungary released a statement. They expressed concerns that information about risks to financial systems in central and eastern Europe is "often simplified and misleading."

And that's the VOA Special English Economics Report, written by Mario Ritter. I'm Steve Ember.