The benefits of the integration of eastern Europe’s financial systems into the world economy outweigh the costs that have been highlighted during the global economic crisis, the European Bank for Reconstruction and Development (EBRD) said on November 2 2009.

The lender's Transition Report 2009, which looks at the implications of the crisis on the region where the EBRD invests – from central Europe to central Asia – said that the global crisis has disrupted the pace of economic reform in Eastern Europe, but there have been no significant reversals in commitment to economic transformation.

"The fundamental growth model for the region remains intact," EBRD chief economist Erik Berglof said in a statement. "However, the crisis has highlighted weaknesses. There are lessons to be learnt," he said.

The report raises questions specifically about the growth model both for countries in central and southeastern Europe, where rapid expansion was fuelled by financial integration, and for commodity rich countries further east whose growth has depended on income from natural resources, the bank said.

For Eastern European countries, the heightened degree of financial integration has brought disadvantages, by encouraging credit booms, over-borrowing and a trend toward foreign currency borrowing. At the same time, it brought high economic growth to the region and the presence of foreign banks played a crucial stabilising role, EBRD said.

"Based on these findings, it is clear that attempting to reverse financial integration would be the wrong conclusion to draw from the crisis. The region would deprive itself of a source of growth," the EBRD report said.

However, the crisis has shown the need urgent steps to help reduce dependency on foreign exchange lending and to manage more effectively the demand for credit in Eastern Europe, according to the report.

Looking ahead to the impact of the crisis on further market reform in the transition region, the report said any new surge in reforms generally was unlikely, even though the financial sector would probably see both institutional change and policy adjustments, including initiatives to increase both the quality and the extent of government regulation.