Eastern Europe must Prepare for the Next Crisis

Opinions | November 29, 2018, Thursday // 11:36|  views

The question of Eastern Europe is not whether there will be a new economic "shock", but when will this happen? And like the movie Terminator, the countries either will be torn apart or will only be saved with traces of smoke.

This is what Roxana Voicu-Dorobantu believes, she is a professor of the Bucharest University of Economics. In an analysis published on Balkan Insight, she commented that the region would surely be hit by a new crisis. "But when will this happen, where and how severe it will be, depends on different factors," said the expert.

"Things do not depend on the crisis itself, but on country sustainability and risk management. In the long run, based on our thousands of years of economic history experience, there will again be financial crises, wars, disasters, because the global system is not strong enough to resist them, "said Dorobantu, adding: "What really matters is the speed at which states recover from it and to what degree they can control the damage."

In her words, the first proof that after the expansion period there is such a slowdown in growth is the cyclicality of the economy. She adds that every economy goes through recession and growth periods, ranging from a few months to tens of years.

The professor points out that in order to cope with the next slowdown in growth, states must have the necessary financial resources, including low debt, and maintaining the necessary levels of financial buffers.

"So in case of a recession that will occur at some point in the future, the country that has prepared itself will have more chances to get out faster from the storm," Dorobantu said.

"There is no one kind of crisis - it can be a currency, a bank crisis caused by a speculative bubble, an international financial crisis, or a wider economic one, and most often they are not isolated and do not distinguish clearly," she explains.

The expert added that there is still no consensus among economists what comes first - the recession that is causing the financial crisis or the financial crisis that is causing the recession. "Ten years have passed since the global financial crisis of 2007-2008, and this period outlines the duration of the economic cycle, so the recession is not very far ahead in the future," the expert said, adding that if the lessons of 2007 are not learned, the next recovery period will lead to new drastic adjustments.


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