Implications of the financial crisis for CESEE countries As you all know, the last two years have been characterized by the global financial crisis. In its early stage, the crisis had been confined to advanced economies. Local and foreign banks in Central, Eastern and Southeastern European (CESEE) economies held only a negligible amount of so-called toxic assets.
Nevertheless, excessive risk-taking put the global financial system under serious stress, which had an adverse impact on the world economy. The CESEE economies were particularly affected by output declines. These were also caused by accumulated vulnerabilities in the region, especially the credit boom (Backé and Wójcik, 2008, Fidrmuc and Hainz, 2010) and foreign currency lending (Dvorsky et al., 2010).