ECB Supports Euro Supply to Five Eastern European Countries Including Hungary and Poland

[Photo by AFP Yonhap News]

[Asia Economy Reporter Park Byung-hee] The European Central Bank (ECB) has signed agreements to expand euro supply to five Eastern European countries, including Poland and Hungary, which have been exposed to currency depreciation risks following Russia's invasion of Ukraine, according to major foreign media reports on the 28th (local time).

The ECB signed a precautionary currency swap agreement worth 10 billion euros with the National Bank of Poland. This is the first currency swap agreement between the ECB and the National Bank of Poland since the 2008 global financial crisis. Under this agreement, the National Bank of Poland can exchange its national currency, the zloty, for euros until January next year.

The ECB also extended repurchase agreements with four countries?Hungary, Albania, North Macedonia, and San Marino?that were scheduled to expire at the end of this month. Under this agreement, Hungary and others can borrow euros from the ECB.

Following Russia's invasion of Ukraine, the currencies of Eastern European countries such as the Polish zloty and Hungarian forint sharply depreciated. The euro-to-zloty exchange rate was around 4.5 zloty per euro just before the invasion but approached 5 zloty per euro earlier this month, marking the lowest value of the zloty since the 2008 global financial crisis.

The depreciation of currency values can lead to increased inflationary pressure due to rising import prices. Inflation rates in Poland and Hungary have already exceeded 8%.

Recently, the National Bank of Poland released euros from its foreign exchange reserves to prevent further depreciation of the zloty. Instead of intervening in the foreign exchange market, the Hungarian National Bank raised its benchmark interest rate sharply by 1 percentage point last week.

This content was produced with the assistance of AI translation services.