Eastern Europe: The New Safe Haven?

Hungary's government is taking steps to pull the country out of the difficult economic conditions it still faces but needs to ensure predictability, Eleni Tsakopoulos Kounalakis, US Ambassador to Hungary, told CNBC.com.

Hungary's decision to help its citizens pay back the foreign exchange loans they took at the height of the economic boom a few years back has sparked outrage among banks and spooked foreign investors.

Slovakia's parliament may vote on the expansion of the euro zone's bailout fund as soon as mid October, but the risk of a Greek default is still possible, Slovak Prime Minister Iveta Radicova told CNBC in an interview in Bratislava.

Central and Eastern Europe have been known as a turbo-charged version of Western Europe: when Western economies merely grow, the Eastern European ones boom. When things are bad in the West, they're awful in the East.

Central and Eastern Europe is still a place where investors can make money but they have to choose their sectors and stocks carefully, emerging markets specialist investor Mark Mobius told CNBC.com in an interview.

With the Swiss National Bank setting a ceiling for the Swiss franc's appreciation against the euro, the need for new safe havens has become acute, and the Czech Republic, with its strong economy and stable currency, is emerging as a contender.

Hungary's government has raised a lot of eyebrows among investors since it came to power in May 2010.

Poland faces parliamentary elections on Oct. 9, but any new government will have to show restraint in spending public money, analysts said.

Slovakia is now, together with the Czech Republic, considered a  relative safe haven, more so than many other countries, both in Central and Eastern Europe and in the euro zone.

With only two countries apart from Slovakia left to approve the extension of the euro zone's bailout fund, all eyes are on the Eastern European nation of around 5 million people who are not keen on helping richer Greece. 

Some analysts have dubbed Central and Eastern Europe a safe haven – due to relatively low risk, because the countries have reformed, and relatively high yields, as they are still seen as emerging markets – but the risks are increasing.

Fear of another downturn in the world economy lurks behind the smiles and relaxed atmosphere; the Czech Republic is heavily reliant on exports to the euro zone, especially Germany, for its economic growth.

Martin Tlapa, Deputy Minister, Ministry of Industry and Trade of the Czech Republic told CNBC.com in an interview in Prague that the "safe haven" label looks rather scary for a small, open economy that needs a stable exchange rate to function properly.

Since it was elected last year, Hungary's government has aggressively aimed to cut the country's debt burden, through raising taxes and nationalizing private pension assets, amongst other measures.

Worries about Western Europe have spilled into countries in Central and Eastern Europe and the region's fate is tightly linked to that of its main exporting market, Wike Groenenberg, head of CEEMEA strategy at Citi, told CNBC on Wednesday.

A collapse of Europe's monetary union would likely lead to a breakup of the European Union as a whole, posing significant risks to the region and even raising the possibility of war in the long term, Poland’s Finance Minister told CNBC.

Slovenia's minority government has collapsed after a no-confidence vote and this could further complicate the passage of legislation to scale up and enhance the European Financial Stability Facility (EFSF), a key element of the euro zone's crisis response.