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EBRD says inflation, euro crisis are largest problems for eastern Europe

Eastern Europe and central Asia run the risk of falling into a worsening debt crisis within the euro zone, as well as increased inflation, said the European Bank for Reconstruction and Development (EBRD) as cited by Bloomberg.

The EBRD expects growth to slow down to 4.4% next year as it raised the economic growth forecast for the region constituting 29 countries, in which it invests to 4.6% from its predicted 4.2% in January, it was said the bank's annual meeting.

If the euro crisis remains unresolved, it may halt investment and capital inflows to eastern Europe, prompting western banks, owners of more than 70% of regional lenders, to scale back loans, the EBRD fears.

Inflation is the largest problem for policy makers in Russia and neighboring states, where increasing wages have the potential to limit growth and competitiveness.