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But the debt also involves bank credit, securities issues and non-resident deposits. The foreign debt burden has reached very high levels in Latvia, Estonia, Hungary, Bulgaria, Croatia and even in Slovenia with debt to GDP ratios ranging from 85 to 110 per cent). The strong growth of foreign-currency loans granted by domestic banks has heightened exchange rate risk in several cases. 1 External debt ratios higher than the emerging country average (% goods and services exports) 150% 100% 50% 0% 2001 2002 2003 Central Europe ■ 2004 2005 2006 2007 2008 Emerging Countries Payment incident frequency has eased but payment behaviour remains volatile Several years of strong growth and the progress accomplished in restructuring the productive apparatus have resulted in improved corporate payment behaviour in the region, albeit still more volatile than in Western Europe.

The impact will be substantial in economies where the housing market had previously experienced runaway growth as in Spain, the United Kingdom and Ireland. Exports outside Europe will come up against unfavourable exchange rates and the American economic slowdown. Continuing strong demand from emerging countries will nonetheless ease the trend. Intra-European sales, meanwhile, will be affected by the less dynamic economic conditions prevailing in Europe. Only the United Kingdom’s sales to its European trading partners could be more dynamic due to the more favourable pound sterling/euro parity.

0 Sweden Spain Austria United Kingdom Belgium France Germany Italy Western Europe After growth peaked in late 2006 and early 2007, the Western European economy went into a moderate slowdown. This trend thus began before the emergence of the summer financial crisis, and it will continue this year while credit conditions have deteriorated and several financial institutions in the region have experienced difficulties. Residential construction, a major growth driver in recent years, has slowed markedly with a downturn likely.