gross debt liabilities was much smaller for the other countries. An important exception is Slovenia, which shows gross debt levels that are more similar to other higher-income members of the euro area. For the new member states, foreign reserve assets are quite substantial (with the exceptions of those who had joined the euro area during this period), providing a buffer against foreign-currency shortages.

Turning to the group of other countries, gross debt liabilities actually fell for these countries between 2002 and 2007. However, there was some deterioration between 2007 and 2009 for most of these countries, while Ukraine saw a very large jump in gross debt liabilities (relative to GDP). In terms of foreign reserve assets, these countries look very similar to the new member states in maintaining foreign reserve assets at around 20 percent of GDP.

Table 3.3a shows the comparative cross-regional data. All emerging regions show gross external debt liabilities that are far below the levels of the Euro Periphery, reflecting a much lower degree of cross-border financial integration. However, across the emerging regions, it is striking that Latin America and Asia witnessed sizeable declines in gross debt liabilities in the 2002-09 period, while the new member states underwent a doubling in gross debt liabilities.

**<u>Table 3.3a. Gross Debt and Foreign Reserves, Percent of GDP</u>**

||G<br>|ross Debt<br>||Foreign E<br>|xchange Rese<br>|rves<br>|
|---|---|---|---|---|---|---|
|Country|2002|2007|2009|2002|2007|2009|
|Euro Periphery|184|315|370|6|0|1|
|Emerging Latin America|61|34|32|10|13|15|
|Emerging Asia|46|37|36|29|36|43|
|New Member States|46|71|84|21|20|20|
|Candidates and Potential|46|47|51|18|22|19|
|Eastern PartnershipCountries|67|46|67|12|21|23|

Source: Updated EWN dataset based on Lane and Milesi-Ferretti (2007). Note: These tables report international debt liabilities and foreign exchange reserves.

Tables 3.4a to 3.4g provide further insight into the gross external debt positions of these countries. Table 3.4a shows total cross-border loans from BIS-reporting banks. Bank loans grew very rapidly between 2002 and 2007, especially for the Baltic States. Since 2007, there has been a degree of deleveraging for many countries. Table 3.4b isolates the cross-border loans made to non-banks: these are only a small proportion of total cross-border loans for most countries. Rather, cross-border loans are typically intermediated via the domestic banking system.

In relation to foreign reserves, the Euro Periphery held very low levels of foreign reserves, in line with membership of a common currency area. While Emerging Europe holds more foreign reserves than Emerging Latin America as a ratio to GDP, the level is far below Emerging Asia. While the Eastern Partnership countries did increase reserve levels between 2002 and 2009, this was not the case for the other regions in Emerging Europe, despite the rapid growth in gross external debt liabilities.

Table 3.4c reports the stock of international debt securities issued by each country. It shows that this is not a major source of external debt financing, with the exceptions of Hungary, Lithuania and Slovenia. As is shown in Table 3.4d, it is striking that the non-banks are the 12