The World Bank is moving to shore up economies in eastern Europe and central Asia as fear intensifies that problems in the euro area have begun spilling over to other parts of the world.
The bank announced on Wednesday it would commit $27 billion to protect developing nations in the region from a western European crisis that has begun to undercut trade and investment.
The move is reminiscent of steps taken by the bank in response to the 2008 world financial meltdown, and reflects a rising anxiety among policymakers that the euro zone’s troubles are beginning to reverberate outside the region.
Top International Monetary Fund officials warned this week that the euro’s problems have increased the risk of a new global recession, and along with others have said that eastern European nations may be the first to feel the fallout.
The region is heavily dependent on capital and investment from the euro area, and the financial systems in countries such as Hungary and Bulgaria are dominated by subsidiaries of banks headquartered in Paris, Athens and other euro region capitals.
As part of the so-called Vienna Initiative, an effort to bolster eastern Europe during the 2008 crisis, the bank took similar steps to provide emergency help in Hungary, Latvia and other countries buffeted by a downturn triggered by problems in the U.S. housing market.
This time, the crisis has begun closer to home. As the euro region faces a likely recession and struggles with public debt and a weak financial system, banks in that region have begun pulling back from lending in eastern Europe, Asia and elsewhere.
Broader talks are underway in Europe among institutions such as the European Bank for Reconstruction and Development about ways to counter the impact, while private groups like the Institute of International Finance see evidence of a major “deleveraging” from eastern Europe.
The IMF is concerned as well. The fund recently renewed a credit line made available last year to Poland, considered a stalwart of eastern European growth but now facing a nearly 50 percent drop in its expected rate of economic growth in 2012 compared with the year before. A recent IMF staff report found that Hungary is also at risk of a downturn.
The amount of money made available by the World Bank is small in comparison with the multi-trillion-dollar war chest many think is needed to fight the crisis globally. But it becomes part of a divisive debate about how to spread the costs associated with the euro’s rescue.
German Chancellor Angela Merkel on Wednesday rebuffed suggestions from the IMF and others that her country needed to do more to protect the currency union.
Meanwhile the Obama administration — watched closely by Republicans in Congress — has said it will not boost its contributions to the IMF despite the agency’s hope to raise about $500 billion in case it is needed.
The United States is also a major contributor to the World Bank, and by tradition appoints the president of the organization, currently Robert B. Zoellick.
Zoellick is a veteran economic official with deep Republican ties whose term expires this summer. He has not announced whether he wants to remain at the bank, and the Obama administration has not signaled publicly if it plans to replace him. But political analysts and news reports have speculated that possible successors include Secretary of State Hillary Rodham Clinton and former Obama administration economic adviser Lawrence Summers.