Central Europe set to pull out of depression

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The Independent Online
CENTRAL European countries are poised to recover from depression for the first time since embarking on free-market reforms.

But in the countries of the former Soviet Union the slump will persist, the European Bank for Reconstruction and Development said yesterday.

Presenting the bank's annual review, Jacques Attali, the bank's president, called on Russia and other republics of the former Soviet Union to abandon the rouble zone.

The zone - in which the republics share the Russian currency - has become a source of hyper-inflation in the region.

Operating the zone, which several republics have left already, had meant that any efforts by the Russian central bank to curb monetary growth were undermined as other central banks in the zone issued rouble credits on their own initiative to finance imports.

As a result, Mr Attali said, by last month inflation in Russia was transformed into hyper-inflation. EBRD figures showed that in 1992 inflation accelerated from 90 per cent to 1,450 per cent and, in the region as a whole, the pace of price increases quickened to 1,371 per cent from 93 per cent.

After plunging by 20 per cent last year, output in the region is set to collapse again in 1993, although perhaps at a slower pace.

In contrast, a strong trade performance by Poland, Hungary and the Czech and Slovak republics last year 'makes it realistic to expect these countries to start reaping the benefits of their efforts', Mr Attali continued.

Exports to the European Community from former Czechoslovakia expanded by 23 per cent in 1992 and in Hungary and Poland they grew by 20 per cent.

Despite expanding trade links with the EC, more were needed. 'With Asia developing a continental trade zone and the prospect of a free-trade zone from Chile to Alaska, Europe should do the same with a continent-wide trade agreement,' Mr Attali said.

He also expressed confidence that the Group of Seven countries might soon approve an EBRD-administered fund to promote nuclear safety in the region, where a large number of nuclear reactors need to be decommissioned as soon as possible.

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