Fears are rapidly growing that the world’s next economic weak point won’t be found in the US, Europe, East Asia or even in slumping Japan: it will be in the old Eastern Europe, where the flow of figures from countries like Russia, Poland, Hungary, Bulgaria and the Czech Republic tell of plunging currencies, production and rapidly contracting economies.

Every economy in the East is tanking: with Russia and the Ukraine probably the most damaged, closely followed by Hungary. Foreign banks have lent hundreds of billions of dollars for loans on housing, to businesses, large and small, to Governments.

The former Baltic states in Latvia and Lithuania are also hurting. Swedish banks are particularly exposed to Latvia where the economy is shrinking and unemployment rising.

Ukraine is effectively broke: its economy is shrinking, steel exports, a major foreign exchange earner, have slumped as the global recession has slashed demand for the metal and the Government is hopelessly divided. Forecasts are for a 4%-5% contraction in the economy this year. Last November, the country secured a $US16.4 billion stand-by arrangement with the IMF; but so far only $US4.5 billion has been disbursed and a visiting IMF delegation left last week without any more being advanced.

But Russia is the worst of these rapidly emerging basket cases. Years of blustering its way through Europe and across the globe, backed by rising income from oil and other commodities, has been replaced by currency and financial crunches that have chewed up over half the country’s $US540 billion in foreign reserves of a year ago.

Overnight figures were released showing Russia’s industrial production plunged 20% last month, the largest drop on record, setting up the struggling economy for a rather large contraction in growth in coming months along the lines reported yesterday by Japan. A one-third fall in the value of the rouble since midway through last year has crunched domestic demand and generated a credit crunch. Plunging share prices and failed bailouts have seen billions of dollars lost, some of the country’s so-called Oligarchs have lost their fortunes and a recession is closing in.

The Government warns growth could fall from 6.3% in 2008 to somewhere between zero growth and a 10% contraction this year.

Morgan Stanley says: “Eastern Europe has borrowed $US1.7 trillion abroad, much on short-term maturities. It must repay — or roll over — $US400bn this year, equal to a third of the region’s GDP. Good luck. The credit window has slammed shut. Not even Russia can easily cover the $US500bn dollar debts of its oligarchs while oil remains near $US33 a barrel. The budget is based on Urals crude at $US95. Russia has bled 36pc of its foreign reserves since August defending the rouble.”

“In Poland, 60pc of mortgages are in Swiss francs. The zloty has just halved against the franc. Hungary, the Balkans, the Baltics, and Ukraine are all suffering variants of this story. As an act of collective folly — by lenders and borrowers — it matches America’s sub-prime debacle. There is a crucial difference, however. European banks are on the hook for both. US banks are not,” London’s Telegraph reported.

In December, Russia’s economy lost a claimed half a million jobs, bringing the total unemployment level to 7.7%, which is a best guesstimate according to commentaries. The real figure is almost certainly much higher.

The Czech Republic has just approved an economic stimulus package, Hungary announced plans to reform its tax code to help boost the economy, and Bulgaria said its economic growth nearly halved in the fourth quarter of last year.

Hungary’s government expects the economy to contract between 3% and 3.5% this year, industrial production fell 23% in December from the same month of 2007, Polish output is falling. Growth in the Czech Republic slowed to 1% in the last quarter of 2008. But at least it’s growth.