Could the gap between east and west Europe open up again – MoneyWeek

Inflationhasreached15%inRussiaandBulgaria,18%inLatvia,and30%inUkraine,asShearingpointsout。

Awayfromtheoverheatingperiphery,inflationislesseye-popping:CzechandHungarianconsumerpriceinflationisaround7%,whileinPolandthefigureis4%。

Buttakeouttheusualsuspectsoffoodandenergy,andcoreinflationisalsolookinguncomfortablyhigh。

IntheCzechRepublic,forinstance,itsover4%,comparedtothecentralbanks3%target。

Thesameappliestowagegrowth–over10%year-on-yearinPolandandtheCzechRepublic。

Thishasraisedthespectreofawage-pricespiralintheregion。

Monetarypolicyismixedacrosstheregion,saysTheEconomist;PolandandHungaryhavepositiverealinterestrates,butinUkrainepolicyistooloose,withcreditgrowthstillexpandingatan80%annualclip。

Onepotentialdangerforinvestorsisthatgovernmentsmaycrackdowntoohardoninflation,causingarecessionandcollapsingearnings,whileanotheristhattheyfailtocontrolit,whichimpliesaslidingcurrencyandapossiblecurrencycrisisasinvestorsloseconfidence。

Afallingcurrencyportendsariseinbaddebtsasmanycompaniesandconsumershavetakenoutforeigncurrenciesoverthepastfewyears。

InEstoniaandLatvia80%ofhouseholdcreditisforeign-denominated;inHungaryandLithuaniathefigureisaround55%。

Meanwhile,ongoingcreditproblemsaredentingconfidenceinequitiesglobally。

So,whilethelong-termstoryremainscompellingandtheNTXsp/eisatathree-yearlowofaround10。

5,thereare,asShearingnotes,likelytobebetterbuyingopportunitiesahead。

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