Major economic institutions have warned Monday that there is an increasing risk of a credit crunch in Central and Eastern Europe.

The World Bank, the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB) made a joint statement at a conference in Istanbul, Turkey

"There are increasing risks of a major credit crunch in the region", the banks said.

"I think it's a warning from the international banks that they (investors) should be really aware of the risks that persist there. There is certainly strong potential for the financial crisis in Eastern Europe to get worse in the next six months ... The potential for bad loans is still rather large“, Ralf Wiegert, an Frankfurt-based economist with IHS Global Insight stated.

The three international lenders said banks in Central and Eastern Europe should tackle bad loans and "undertake loan restructuring on a commercial basis and recapitalize as needed."

The institutions, which launched an initiative to rescue the region in February, said they had so far made available EUR 16,3 B in assistance to the region.

Some countries in Central and Eastern Europe have been particularly badly affected by the global economic crisis. The IMF expects the region's economy to shrink by 5,0% in 2009 and grow 1,8% in 2010.

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