Eastern European currencies crumble as fears of debt crisis grow
Currencies have crumbled across Eastern Europe on mounting fears of a debt crisis as foreign creditors withdraw from the region.
Hungary’s forint fell to an all-time low on Monday, and Poland’s zloty slumped to the lowest in five years on plunging industrial output. Half of all loans to the private sector in Poland are in foreign currencies so borrowers face a severe debt shock after the 40pc fall of the zloty against the euro since August.
“We’re nearing the level were things could get out of hand,” said Hans Redeker, currency chief strategist at BNP Paribas.
The mushrooming crisis has already started to spill over into Germany’s debt markets, lifting credit default swaps on German five-year bonds to a record 70 basis points. The gap between French and German CDS spreads has narrowed abruptly for the first time since the credit crisis began.
“Investors are beginning to ask whether Germany is going to have to pay for the rescue of Eastern and Central Europe,” he said.
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Failure to save East Europe will lead to worldwide meltdown