It’s the final blow for Washington’s neoconservatives. In its dwindling days the Bush presidency is forced to watch as state institutions mount rescues of the emerging economies of Eastern Europe. One by one, they are laid low, the “transition” economies: former Soviet satellites and even a former Soviet republic – Ukraine – are to receive a $16 billion infusion from the International Monetary Fund.

The financial distress resembles the front line on the old Soviet border. Hungary is bleeding in a ditch, waiting for a field ambulance. The IMF has promised cash and the European Union, too, will open its wallet. Romania’s currency has been relegated to “junk bond” status by Standard & Poor’s and the World Bank has told Bulgaria to prepare an emergency plan to reassure the markets. The transition states are Northern Rock writ large. Unable to generate savings internally, Hungary bankrolled its expansion with foreign loans. These must be refinanced, but Western banks, once eager lenders, are sucking back cash – the exodus caused the Hungarian florint to shrink in value and the nation’s foreign debt in euros looks less affordable every day.

Bankruptcy can be a solution for individuals but it is a disaster for nations. Elsewhere, Pakistan is suffering a balance of payments and inflationary crisis. It must raise billions of dollars to pay for food and other imports, but is reluctant to approach the IMF because the “medicine” would be political poison in a febrile atmosphere. Germany hopes to orchestrate a friendly bailout that would avoid or at least postpone a crisis.

How much aid can we afford? Pakistan, on the front line of the Afghan war, will get its billions, but the West is deeply in debt. Pockets in China and in the Gulf states must be raided. The political price for this financial chaos is only just emerging.

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