Kori Udovicki, the assistant secretary-general of the United Nations Development Program (UNDP) for Europe and the commonwealth of independent states, spoke recently to Kathimerini about the effect that the global economic crisis is having on the countries with which she works. In her view, some countries have a privileged position when it comes to international funding, even if they do not always adopt the wisest economic policies. Udovicki warns that this does not bode well for the future of reforms that are needed in this region. Stressing that the basic aim of the UN is to protect the poor and the weak, she believes that the countries in the region will have to focus not on the influx of capital from abroad, but on improving competitiveness and developing their human resources because that will ensure a decent standard of living. What is the role of the UNDP in this crisis? We assist the governments in wide matters of governance as well as economic matters. Emphasis is given to the protection of the poor and the most vulnerable. What characterizes our work at UNDP, and more generally at the UN, is that we assist, we work with governments – together we determine the priorities and we work together for their materialization, according to their capabilities and the institutions of each country. In the area of Eastern Europe and the former USSR states, the UNDP promotes mainly «green» public works of small size that may support employment and promote environmentally friendly solutions. These are activities such as the improvement of energy use effectiveness and the promotion of renewable energy sources at the local level, especially in areas that lack energy resources. We believe that this is a more efficient way to help people who lose their jobs or to boost employment instead of simply transferring funds. Moreover, these solutions do not require large sums of investment in order to materialize. You mentioned the different aspects of each country. Is this what you base your argument on when you say there is no exit strategy from the crisis that is suitable to all countries? Yes, I would say that this is a fact, especially in the area of my responsibility, which is quite wide and includes many countries. It is true that in 1999, when several of these countries were leaving behind their communist regimes, the direction was, in general terms, the same – privatization, liberalization etc. Soon enough though, this course of action was understood as overly simplistic. And when you look at it as the only alternative, it is surely over-exaggerated. Wherever the state management of governmental organizations stopped, the choice often was simply no management, instead of management according to market rules. Some countries possess stronger institutions than others and I would say, as such that «it is not very important what color the cat is, as long as it is able to catch the mice.» The crisis has reminded us of this. The answer to the crisis must be determined and be evaluated by each country, in connection with its institutions and state of affairs. Are you optimistic that this will happen? Will the crisis change the way people confront financial challenges? This has already happened. It is a historical irony that it was a conservative, extremely economically liberal government in the USA which has undertaken the greatest – to date – state intervention in the economy. If there were wrong facets of this intervention and how these are corrected, this is another matter, but it is interesting that even a government with such characteristics recognized the urgent need for governmental intervention. Even the fact that it was forced to take action points to the fact that the exclusion of any state intervention cannot be a dogmatic view. Similarly, the best solution for any one country eventually may not be the best for another. Policies may be determined by the countries themselves on the basis of institutions and their choices, depending on the conditions that prevail internally and not based on the virtual model that anyone may prefer. How is the crisis affecting the countries of Eastern Europe? The repercussions vary based on two or three factors. The first is whether a country is rich in energy resources. Of course, the countries which have followed a sober economic policy, accumulating reserves when the price of their products was high, possess a cushion that may be utilized with a lot of prudence, as it is difficult to predict how long this crisis will last. A second factor is the previous situation in terms of fiscal management. The countries with a somewhat looser management of their fiscal systems and an expanding fiscal policy have been affected more, compared to the prudent ones. The third factor is that some countries, for political reasons, have easier access to international finance than others and this unfortunately sends the wrong messages in the long term. The support that some countries have does not coincide at all with whether they followed prudent policies before the crisis and this is not a good signal for reform in the future. If you are prepared to spend billions to get not-so-careful governments out of the crisis, you should be spending a lot more for those who follow prudent policies. The banking sector in Eastern Europe has been badly affected. How significant do you think this is? It is a big problem and we must realize that it will be with us for a rather long period of time. First, in the future, we need to acquire a worldwide answer as to what the countries, which are called upon to liberalize and open their markets, should do when they receive incoming capital. Furthermore, [we also need a worldwide answer as to whether] we can or whether we should support more control of capital flows in the future, when they receive the incoming flows as well as whether we could offer these countries some guarantees when the situation reverses. This is one of the biggest questions that may be answered by the new world structure. The other matter that is highlighted and must be carefully examined is whether the development of our area depends to a great extent on the availability of excessive capital that was created through the big bubble of the Western capital markets, which have now deflated. We cannot await these type of capital inflows in the future. The countries of the region must prepare themselves for a long-term shift in their income. They must focus more on their competitiveness and in the development of their working capital capacity, as this is the only way to ensure the level and standard of living that they envision.