Debt Sustainability in the Wider Eastern European Region: The Long Shadow of the EU

6. Conclusions This underlying assumption of this study was to a degree supported by a series of probit estimations: “institutions” can substantially reduce the occurrence of debt distress episodes. A “credibility import” from external regional groupings, like the European Union in the New EU Member States (NMS), plus a perceived credible possibility of eliminating the external constraint through the process of EU membership and consequent eventual euro area membership, can lower the debt sensitivity of those countries to levels more similar to the ones observed in mature market economies, therefore helping to support sustainable and stable growth for the countries in question. The policy implication of this for the other countries in the wider Eastern European region is that such a credibility/institutions import, perhaps via multilateral “framework providers” like the IMF, the OECD or the WTO, or even other regional actors, like the CIS, could produce somewhat similar effects, helping to make the regional growth upswing more sustainable in the long run, albeit none of those “framework providers” even approaches the degree of comprehensiveness of the EU’s “acquis communautaire”. On the other hand, for the Eastern European countries who are not likely candidates for an eventual EU membership, it is open to question if the new ENP (European Neighbourhood Policy) would have the same degree of effectiveness of an Accession framework, given the lack of the membership “carrot” to lock in deep structural reforms. Of course, the endogenous construction of °ood institutions” is obviously possible (one just have to look at the case of Chile, which has completely decoupled itself from the rest of Latin America, in terms of market perceptions), but an “institution import”, if possible, would imply a faster (Chile took almost a generation to become as credible as it is today) and less costly process.