Feb. 18 (Bloomberg) -- The European Union may only be able to play a limited role in financially supporting countries on its eastern fringes like Ukraine and Croatia, Monetary Affairs Commissioner Joaquin Almunia said.

He named the EU last among organizations which need to be involved in the region’s “difficult situation.” Others included EU member governments, east European governments, banking regulators, the European Bank for Reconstruction and Development, the World Bank, the European Investment Bank and “other” financial institutions.

“What we cannot do” is to provide non-member countries with the same sort of assistance which may be available to EU members, Almunia said at a press conference in Brussels today. The EU would be willing to “coordinate the kind of support that is needed to avoid the deepening of the crisis” with member states including Austria, he said.

Raiffeisen International Bank-Holding AG and Erste Group Bank AG of Austria, Societe Generale SA of France, KBC Groep NV of Belgium and UniCredit SpA of Italy, all of which have units in the region, declined in trading yesterday after Moody’s Investors Service said some of Europe’s largest banks may be downgraded because of east European loans.

“Austria is on the hook for so much money that essentially if they don’t get paid, they’ll go bust,” Marc Faber, publisher of the “Gloom, Boom & Doom Report” and managing director of Marc Faber Ltd., said in an interview with Bloomberg Television today. “So the European Union has to help Austria one way or another.”

Economies Weakening

The MSCI East Europe Financials Index fell by 3.8 percent percent at 5:18 p.m. Central European Time, for a decline this year of 53 percent. Units of Austrian, Italian, French, Belgian, German and Swedish banks account for 84 percent of western European bank loans in eastern Europe, Moody’s wrote.

Central and east European economies are weakening, with the International Monetary Fund already offering about $52 billion in aid to Latvia, Hungary, Serbia and Ukraine. Bailouts may be extended to Bulgaria, Romania, Lithuania and Estonia as the global recession derails more banks, according to Capital Economics research.

Euro region countries would help cash-strapped members of the 16-nation currency bloc even though EU rules don’t require such action, German Finance Minister Peer Steinbrueck said today.

“We would show our ability to act” should countries face problems, Steinbrueck said. The remarks amplified Steinbrueck’s remarks on Feb. 16 when he said euro-region “states would have to rescue those running into difficulty.”

Eastern Borders

Austria’s finance minister Josef Proell last week visited his counterparts in Croatia, Ukraine, Romania and Bulgaria in an effort to help organize financial aid for the most stricken countries in the region. Austrian banks have extended 230 billion euros ($290 billion) in loans in eastern Europe.

In December, Raiffeisen International and Erste together with UniCredit, Intesa SanPaolo SpA, Societe Generale and KBC asked the EU to organize financial aid for countries on its eastern borders.

To contact the reporters on this story: Meera Louis in Brussels at mlouis1@bloomberg.net; Zoe Schneeweiss in Vienna at zschneeweiss@bloomberg.net

Last Updated: February 18, 2009 11:35 EST