EASTERN EUROPE : The crash

Hungarian, Polish and Czech government debt, among the highest rated in emerging markets, has already been downgraded by bondholders.

Investors are demanding 20 basis points more yield to own Hungary’s bonds than similar-maturity Brazilian debt, which is rated four levels lower by Moody’s Investors Service, JPMorgan Chase & Co. indexes show.

The risk of Poland defaulting is about the same as Serbia, ranked six levels lower by Standard & Poor’s, based on credit-default swap prices. Czech 10-year bonds yield the most compared with German bunds since 2001.

Investors who lost more than 18 percent on emerging-market sovereign and corporate bonds last year based on Merrill Lynch & Co. indexes now face steeper declines in Eastern Europe. While the region’s integration with the European Union spurred foreign investment earlier this decade, Poland’s currency weakened 35 percent against the euro since August, the Czech economy cooled to the slowest pace in almost 10 years in the fourth quarter and Hungary required a bailout from the International Monetary Fund.

Emerging Europe will post an average current account deficit of 4.1 percent of gross domestic product this year, more than double the 1.7 percent deficit in Latin America and trailing surpluses in Asia, Africa and the Middle East, according to Citigroup Inc. data on Czech, Poland, Hungary and five other economies the region.

How will Western Europe be affected by the implosion of the region, remains to be seen.