Countries of central and southeast Europe must develop local currency capital markets to overcome addiction to foreign currency debt and encourage stronger reliance on domestic savings in order to avoid problems that hit them after the global financial crisis broke out, it was said at Friday's panel debate on capital markets, held as part of a European Bank for Reconstruction and Development (EBRD) annual Assembly meeting in Zagreb on Friday and Saturday.
The lesson that can be drawn from the recent crisis is - do not borrow too much from the international financial market, you have to stimulate local markets and solve local problems on your own, said Julia Kiraly, vice governor of the Hungarian National Bank.
Fiscal discipline is necessary to overcome the consequences of the crisis and stimulate economic recovery, Kiraly said, adding that the governments of the countries of the region had contributed to the crisis with their fiscal non-discipline.
Stressing that neither banks nor regulators had done enough to limit foreign indebtedness, participants in the panel discussion recommended better relations between banks and regulators and joint efforts invested in the strengthening of the capital market.
Banks should encourage loans in national currency so as to create a strong local debts market, while loan seekers should not take loans in foreign currencies unless their income is in foreign currencies, said the CEO of Erste Group, Andreas Treichl.
Central and southeast Europe have made great progress, given that 20 years ago there was practically no capital market in the region.
However, the situation today is better than a year ago, it was said at the panel discussion.
