Fears that euro-zone banks might suddenly withdraw their funding to subsidiaries in Emerging Europe have eased markedly over the past month, due in large part to the success of the ECB’s long-term refinancing operation (LTRO) in reducing strains in Western European funding markets. Yet there remains a very real threat that euro-zone banks will gradually scale back credit lines to Emerging Europe, and this could still have a marked impact on growth in a handful of countries – notably Hungary and the Balkan states. Meanwhile, although, in the very near term at least it now looks much less likely, a more abrupt withdrawal of funding would have far more widespread and damaging effects.