European central banks defend their economies against speculation

The central banks of the Czech Republic, Bulgaria, Poland, Romania and Slovakia said talk of troubles in the financial sector was "often simplified and misleading and could have negative implications for banks operating in these countries."

The fact that several Western banks are exposed to the financial crisis in Eastern Europe and could be hit hard by losses posed "a high reputational risk" to the countries financial systems, the statement said.

Last month, credit ratings agency Standard & Poor’s said that "all the ingredients for a crisis are in place" in Eastern Europe because of rising government debt and a heavy reliance on foreign lending.

Credit ratings agency Moody’s also said recently that faltering economic conditions in Eastern Europe will continue to hit local subsidiaries of major Western banks, which could spill over to their corporate parents, primarily in Austria, Italy, France, Belgium, Germany and Sweden.

"Such self-fulfilling speculation totally disregards fundamental economic developments in the countries and creates misperceptions that could inevitably be detrimental to both the region and Europe as a whole," the central banks said.

On Friday, leading international financial institutions, including The European Bank of Reconstruction and Development, the World Bank and the European Investment Bank said Eastern Europe’s struggling banks will receive 24.5 billion ($30.9 billion) worth of emergency help to shore up their battered finances.

The five central banks said Wednesday the region is not "homogenous" and each country has its own specific economic and financial situation.

"It is thus important first to distinguish between the EU Member States and the non-EU countries and also to clarify issues specific to particular countries or particular banking groups," the statement said.

Ivo Prokop, currency trader at the Raiffeisenbank bank in Prague said that investors seemed to agree with statements like this because "fundamentally, they make sense".

"It could help the (local currency) koruna," he said.

The koruna was traded at 27.75 to the euro at midday Wednesday, down 0.62 percent, but still firmer than the 28.50 per euro it hit at the beginning of the week, Prokop said.

"The investors now selectively pick up the best they can get in the region, the panic selling seems to be over," he said.

The Czech Republics Finance Minister Miroslav Kalousek insisted last week his country did not need any help.