Morgan Stanley: Romania's EUR 5.4 bln precautionary credit line, not enough in case of severe de-leveraging

Eastern European countries – Romania included – may need more aid from the International Monetary Fund (IMF), as they face risks of a financing gap as Western European banks cut support for local subsidiaries, according to Morgan Stanley analysts, quoted by Bloomberg. “Looking at de-leveraging pressures, we find that aggressive retrenching by western European banks could leave a funding gap in central and eastern Europe such that most countries, except the Czech Republic, would need to tap existing support packages or negotiate more assistance with the IMF and the European Union,” the Morgan Stanley report said. Romania’s EUR 5.4 billion precautionary credit line “may not be enough” if banks de-leverage. Even so, the Morgan Stanley analysts don't expect a big bang withdrawal from the region. “For the banks in particular, we think that IMF and European Commission involvement in any given country in central eastern Europe would be particularly encouraging,” the report reads. Austrian banks are already under pressure as Austrian banking market regulators decided in November banks would not send funds to subsidiaries, forcing them to find financing elsewhere- either through deposits or though financing lines from international lenders. editor@romania-insider.com (photo source: Photoxpress.com)