$27b for euro-hit nations

World BankWASHINGTON/DAVOS: The World Bank said on Wednesday that it was making $27 billion available for countries in central and eastern Europe and Central Asia impacted hard by the eurozone crisis.

The bank said the euro area’s ongoing debt crisis was hitting the former Soviet bloc countries hard by cutting trade, finance and worker remittances crucial to their growth.It said that due to their close links with the eurozone, the countries of central and south-eastern Europe face an economic slowdown this year.The $27 billion will be made available to help them over the next two years, the bank said, to help maintain fiscal balances, continue supporting businesses, and strengthen social safety nets for the people most vulnerable to the downturn.

“While the effects of the eurozone crisis on the largest economies of Western Europe receive most of the world’s attention, the crisis is also hurting people in emerging Eastern European countries, particularly the poorest in central and southeastern Europe,” World Bank President Robert Zoellick said.Meanwhile, IMF Managing Director Christine Lagarde said that public sector holders of Greek debt, such as the European Central Bank, may need to take a haircut if a private sector restructuring is not enough to make Greece’s debt burden sustainable.

“The balance between the participation of the private and the public sector is a concerning question,” Lagarde told journalists in Paris on Wednesday, without mentioning the ECB by name.Billionaire investor George Soros said that German-driven austerity plans in Europe risk creating tensions that could splinter the region as it struggles with a debt crisis entering its third year.“Germany is acting as a task master, imposing fiscal discipline,” Soros told reporters at the World Economic Forum in Davos on Wednesday. “But that could create tensions that could destroy the European Union.”

Investors have become less upbeat about the euro region, according to a Bloomberg Global Poll. For the first time, a majority — 56 per cent — say one or more nations will leave the single currency in the next 12 months. Meanwhile, Greece is trying to complete a deal with private bondholders on a debt-relief plan before a summit of European leaders on January 30.“Greece may pose a problem if it in fact defaults,” Soros said. “Defaulting by itself doesn’t necessarily mean they will leave the euro. But the need to at least reach a primary surplus may force Greece out of the euro.”

Chastened leaders of the global business elite admitted on Wednesday that the Western free-market model has come up short and faces being shoved aside by emerging power state capitalism.Over four decades, the annual WEF in Davos has become an emblem of the triumphant market, but this year delegates warned that a new model must be found to kickstart growth and create jobs.Five days of public debate and private networking began with a stark warning from a debating panel of experts that the historic motors of the 20th century global economy have been weakened by inequality and yawning deficits. – Khaleejnews