Concerns that a rapid influx of capital into emerging markets may sow the seeds of the next bubble do not really apply in Eastern Europe. This is because, so far, at least, capital inflows to the region have been fairly moderate compared to the likes of Asia and Latin America. This reflects a combination of factors including a weaker growth outlook, lingering concerns about the health of banks and some, albeit isolated, political risks. Admittedly, there is a chance that one or two of the region’s bright spots – notably Turkey, Poland and perhaps the Czech Republic– could find themselves on the receiving end of a potentially destabilising influx of capital over the next year or so. But elsewhere relatively large external financing requirements mean that the bigger near-term risk is that capital inflows are too weak rather than too strong.