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In what will come as a relief to the many pundits who worry that European authorities are failing to grasp the urgency of the problems growing in the east, the largest multilateral investors and lenders in Central and Eastern Europe - the EBRD, the EIB Group, and the World Bank - have pledged to provide up to €24.5bn to support the banking sectors in the region and to fund lending to businesses hard hit by the global economic crisis.

In a statement, the group says this initiative complements national crisis responses and will deploy rapid, large-scale and coordinated financial assistance from the international financial institutions (IFIs) to support lending to the real economy through private banking groups, in particular to small and medium-sized enterprises. The financial support will include equity and debt finance, credit lines, and political risk insurance. "The IFIs believe firmly that coordinated action among the IFIs, the bank groups, governments across Europe and the European institutions will help the financial sector in the region emerge robustly from the current crisis," a statement said.

"The institutions are working together to find practical, efficient and timely solutions to the crisis in Eastern Europe. We are acting because we have a special responsibility for the region and because it makes economic sense. For many years the growing integration of Europe has been a source of prosperity and mutual benefit and we must not allow this process to be reversed," EBRD President Thomas Mirow said.

The move has been welcomed by many, though criticised as a bit too little, too late. Given the size of the problem in CEE and total European bank exposure to emerging Europe runs in excess of $1.5 trillion, this money is really small change.

"Credit to Robert Zoellick, the World Bank chief, who has been banging the drum for the CEEMEA region fore the past few weeks, trying to impress on his G7 policy colleagues that there really is a problem in the region which needs to be addressed. He is right, and is one of the few World policy makers to have got the message that the region really does need help," says Timothy Ash, head of CEEMEA research at Royal Bank of Scotland.

Under the two-year plan:

--The EBRD will provide up to €6bn for the financial sector in 2009-10 in the form of equity and debt finance, to banks and directly to SMEs, and trade finance. The EIB will provide some €11bn in SME lending facilities in Central, Eastern, and Southern Europe, of which €5.7bn is already available for rapid disbursement, with a further €2.8bn set for approval by end-April and further tranches expected to follow. The EIF, the EIB Group's venture capital and SME guarantee arm, is also aiming to increase its activity in the region over the next two years;

--The World Bank Group will provide support of about €7.5bn;

--IFC, through its crisis response initiatives in sectors including banking, infrastructure, and trade as well as through its traditional investment and advisory services, is expected to contribute up to €2bn;

--IBRD intends to increase lending in Europe and Central Asia up to €16bn in 2009-10 out of which up to €3.5bn is envisaged for addressing banking sector issues in emerging Europe;

--MIGA will provide political risk insurance capacity of up to €2bn for bank lending, subject to Board approval.

"The response to Europe's integrated financial markets requires fast and coordinated action; from parent banks, which own a large part of the region's financial sectors; from systemically important local banks; from home and host country authorities of cross-border banking groups and from the European institutions and the IFIs. By jointly addressing urgent financing needs, the three institutions in this initiative are drawing on their own mandates and specific capabilities to provide financial support," the statement said.

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