As deep recessions in the region have unfolded, all countries in Emerging Europe have experienced a sharp deterioration in their public finances. Some nations, particularly those that have turned to the IMF for funding assistance have already been forced by conditions of their loans to tighten fiscal policy. However, the public finances are a growing concern even in the healthier economies. The Czech Republic and Turkey have recently outlined tightening measures and we expect that Poland will also be forced by constitutional rules to tighten fiscal policy next year. This is just another reason to expect the region’s recovery to be weak.
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