G8 summit: We must help other countries prosper, says Chancellor

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CHANCELLOR George Osborne warned yesterday that the eurozone crisis threatens to set back the countries of eastern and central Europe that have developed into market economies since the fall of the Berlin Wall.

Mr Osborne also inisisted that the international community must invest in the economies of the Arab Spring, to foster their transition into prosperous democracies and bolster them against the threats of instability and extremism.

Addressing a conference in London of the European Bank for Reconstruction and Development – set up to aid the transition of former Soviet bloc states – he said: “Even those countries that have made the greatest progress still need assistance … because the financial crisis has led to significant instability as the foreign banks that dominate central and eastern European banking have undergone aggressive deleveraging.

“As the storms of the eurozone crisis gather again, there is a risk that some of the good work in building a stable financial sector and creating jobs and prosperity might unwind. Like the UK, the region’s growth prospects are closely tied to those of the euro area and deleveraging magnifies this effect.”

He also said it was vital not to deprive Arab countries which have shaken off dictatorship of the financial support they need to thrive.

The Chancellor urged members to ratify rule changes to allow it to use its special funds in the southern and eastern Mediterranean.

The changes were agreed by the bank’s governors last September and are due to come into effect in the summer, but 44 countries are yet to ratify.

Mr Osborne told the meeting: “A Middle East of open and democratic societies would transform the security of the world and brighten the prospects of millions of people.

“But there are huge challenges ahead. All those countries have suffered sharp reductions of growth as uncertainty deters foreign investment and tourism, and we need to help them.”