EUROPE - Central and Eastern Europe is not immune from the effects of the global credit crisis according to Eurohypo, despite claims the region is insulated from global shocks.

Speaking at the IPD Central and Eastern Europe Market Perspective conference in Budapest last week, Simon Rubinsohn, chief economist at RICS, likened CEE to "an oasis of stability" in comparison to the mature Western markets already affected by the global credit crisis, and the Baltics and South East Europe which look more "vulnerable".

More specifically, Rubinsohn said the CEE economies are better balanced than those of the Baltic region and South East Europe, citing low inflation, comparatively low current account deficits and the majority of capital inflows coming from the most "desirable" source - direct foreign investment.

That said, Markus Leininger, head of corporate banking in Northern, Central and Eastern Europe at Eurohypo, warned the region "may be a little bit more remote, but it will still be hit".

In contrast to Rubinsohn's optimistic analysis, Leininger said no region is safe from what is a "global crisis" and noted CEE would feel the ramifications through the tightening in business activity of banks with sub-prime exposure, Eurohypo itself included.

"Eurohypo has sub-prime exposure," Leininger admitted. "CCE may be a little bit more remote, but it will be hit by hit by people like us... because they are not able to do business as they did before."

He also suggested the global banking sector will be experiencing problems across the board, even where they claim not to have any sub-prime exposure.

"No bank around the globe currently can disappear... Don't trust the people who say 'we have no problems'. Everybody in the industry has problems. Everybody," he said.

Leininger does not expect the crisis to abate before the end of Q2 2008, when the second wave of sub-prime mortgage resets are expected to occur.

He suggested a resurgence in investor confidence was needed for the markets to return to normality but this was dependent on the results of year-end accounts and on banks writing off business quickly and resolutely, as opposed to doing so on a gradual, piecemeal basis.

"Hopefully, the management of the international banks are smart enough now to write off what they know will happen in the future and not do the kind of survival tactic of 'now a little bit, now a little bit more'," continued Leininger.