Central banks across Europe cut their key interest rates on Tuesday, December 18, in an attempt to counter the slow-down effect on their economies by the Eurozone debt crisis.
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Sweden, Turkey, and Hungary each have close financial ties with the Eurozone even though they are not members of the euro. Each country’s economy has been hurt by a decline in demand for their exports by Eurozone countries.
Sweden and Turkey have seen their economies slow down as a result of the crisis and Hungary has seen its economy contract for the past three quarters as a result of its own financial issues.
The Riksbank, central bank of Sweden, cut its main repo rate to 1% from 1.25%. Turkey’s first cut in more than a year was to 5.5% from 5.75%. Hungary cut its rate for the fifth consecutive month from 6% to 5.75%.
Sweden’s strong economy has been resilient to the debt crisis in Europe but household consumption is weak and unemployment is rising.
More rate cuts are expected at the meetings of the central banks in February.
Turkey’s economy was one of the fastest growing
in the world during 2010 and 2011. Its growth has slowed significantly in 2012 but the country has found strong demand in the Middle East as an alternative to Europe.