Economic change and social challenges
After the collapse of the Soviet Union and the fall of the Berlin Wall, South Eastern Europe developed rapidly. Following many decades of communist dictatorship in the former Eastern block countries, numerous nations made the transition to democracy and the market economy. Countries such as Hungary, the Czech Republic, Poland, Slovenia, the Slovak Republic and the Baltic States quickly caught up with Western Europe and were able to join the European Union (EU). However, in some countries, the change was accompanied by conflicts or even war and, at the outset, a drastic downturn in the economy.
High levels of unemployment and widespread poverty remain a key challenge in the region. Infrastructure, particularly the energy and water supply, frequently does not match western standards, due to armed conflicts, a lack of investments and the mismanagement of the planned economy era. In some states, for instance the Caucasus countries, there is still a democratic deficit and state institutions are often inefficient.
KfW Development Bank, on behalf of the Federal Government, is supporting the countries in Eastern and South Eastern Europe to drive forward social and economic change. Part of this work includes assistance in creating new jobs ‒ in the financial sector of nearly all the region's countries, support is provided for setting up efficient financial institutions, which are active in financing micro, small and medium-sized enterprises in the long term.
KfW is involved in modernising and extending infrastructure which is necessary for economic progress. This includes setting up better drinking water supply and wastewater disposal systems and modern refuse disposal management. Furthermore, it is also a matter of ensuring a sustainable supply of energy through expanding environmentally friendly sources of renewable energy, and at the same time, safeguarding the efficient use of the electricity produced. In total, KfW Development Bank committed around EUR 1.4 billion for the region of South Eastern Europe and the Caucasus in 2019.