The social context in conditionality

When it comes to embracing the European Union’s (EU’s) vision of building a fully integrated financial market, central and east Europeans have far out-performed their west European counterparts. After all, the EU and its previous incarnations have long aspired to a fully integrated financial market for the Continent that would bring down costs, increase efficiencies and facilitate cross-border transactions of all kinds. ¹ Nowhere is the divergence between East and West more striking than in the strategic sector of banking. Across Central and Eastern Europe (CEE) it is now usual to find foreign investment levels in banking at 70 percent and upward. Among the ‘old’ 15 EU members, however, foreign control over banking assets more commonly hovers below 20 percent, and in many cases well below 10 percent. The outcome in CEE is even more surprising in light of the fact that in virtually no postcommunist country was there an élite consensus at the outset of transition in favour of high levels of foreign ownership. On the contrary, leaders initially sought to protect their banking sectors from foreign control.