BRUSSELS — Support is building in Europe’s richer western countries to help the banking systems in poorer eastern neighbours over fears that ripples from a crisis in the east could reach them too.

Austria is spearheading a campaign to orchestrate EU aid packages for eastern European banks — many of which are owned by western groups — that run into trouble as a result of the global financial crisis.

"In the past, Austria profited from being the hub for economic relations with eastern Europe," Chancellor Werner Faymann said after a cabinet meeting on Tuesday.

Austria had managed to notch up stronger growth than many of its EU neighbours "not least thanks to the dynamism of our exports to that region and to the banks that are involved there," Faymann said.

In times of recession, Austria should therefore "take the initiative and together with other EU countries and the International Monetary Fund (IMF) support individual countries in the region," he said.

German Chancellor Angela Merkel threw her support on Wednesday behind the Austrian initiative after talks in Berlin with Faymann, who was also to meet on Thursday his Czech counterpart Mirek Topolanek, holder of the EU’s presidency.

"We have a shared responsibility for central and eastern Europe," Merkel said.

She told a joint news conference that the region was a strong importer of Austrian and German products and underlined the importance of sending a "political signal" that western Europe would not leave it in the lurch.

Merkel cited the example of Hungary, which received a 20-billion-euro (27-billion-dollar) lifeline from the International Monetary Fund, the World Bank and the European Union in October.

Since the Hungarian bailout, the EU orchestrated a 7.5-billion-euro international loan package for Latvia to help the embattled Baltic country cope with a severe economic downturn.

Romania could be next in line with President Traian Basescu saying on public radio on Tuesday that Bucharest had contacted the European Commission about a loan for six to seven billion euros.

"I am not in favour of a loan from the IMF because we can get European money more cheaply," he said.

Eastern Europe is not only heavily dependent on richer western European countries to sell their exports to but also relies on increasingly rare western credit to grease the wheels of its economy.

Hungary and Latvia had to appeal to their international partners for support when foreign private sector credit dried up, provoking balance of payments crises in the two countries.

Much of the banking sector of eastern Europe is owned by western European banks, which raises the question of who should bail out their eastern subsidiaries when they run in trouble.

"In the last few years we have seriously increased financial integration in the EU, mainly to cross-boarder mergers," said the European Commission’s spokeswoman for monetary matters, Amelia Torres.

"This also implies a shared responsibility by the banks and their home countries in ensuring financial stability in the countries where those banks operate," she added.

The head of the European Bank for Reconstruction and Development, Thomas Mirow, argued earlier this week in favour of coordinated action to ward off the threat of a banking crisis in eastern Europe to the rest of the continent.

"The banking sector is crucial to the current crisis and to the region’s recovery," Mirow wrote in an opinion piece in the Financial Times on Monday.

"As a practical step, there must be close cooperation in addressing both regulatory concerns and providing financial support for parent banks and their subsidiaries in emerging Europe," he added.

AFP/Expatica