The Economic Potential of a Larger Europe
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The Economic Potential of a Larger Europe

Edited by Klaus Liebscher, Josef Christl, Peter Mooslechner and Doris Ritzberger-Grünwald

The Economic Potential of a Larger Europe gives insights into past, present and future issues related to the ongoing EU enlargement process. Providing a unique forum for debate and a multiplicity of views and experiences from both high-profile academics and those who engage with enlargement on an implementation level, this book covers a wide range of topics that are key to a successful transition and integration process and thus to the provision of a prosperous growth environment within a larger Europe. Special attention is paid to monetary integration, notably entry into ERM II, on which representatives of the national central banks involved present their views.
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Chapter 18: Fiscal cost of state-owned banks in selected economies of Central and Eastern Europe

Khaled Sherif


Khaled Sherif 1 The aim of this chapter is to determine the fiscal cost of state banks to selected economies in Central and Eastern Europe, as well as to examine some of the most fiscally draining banks in the process. For this purpose we examined state banks in 14 countries, ranging from countries on the verge of acceding to the European Union in 2004 (namely the Czech Republic, Hungary, Latvia, Lithuania, Poland, Slovak Republic, Slovenia) to countries that will not accede for many years (namely Albania, Bulgaria, Croatia, Macedonia, Romania, Turkey) or possibly at all (Ukraine). In addition, some data have been included on two CIS countries that have broadly resisted structural reforms to move banking to a more private sector-driven market (Turkmenistan, Uzbekistan), although specific information on their banks is not included.2 In the process, nearly 50 state banks were examined, of which 29 were reviewed in fairly thorough detail. These banks required significant amounts of Government assistance to restore them to financial, managerial and operational viability. Among the 29 banks, 10 received at least USD 1 billion in fiscal recapitalization, including five banks that received anywhere from USD 2.4 billion (Bancorex in Romania) to USD 15 billion (Ziraat in Turkey). Among the 29 banks reviewed, only eight received less than USD 250 million in direct fiscal recapitalization, with the lowest amount to date recorded being USD 100 million for Oschadny Bank in Ukraine. This assistance has generally been provided in two forms: either in additional capital...

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