The European Union must save Greece and private bondholders have already begun to price in taking part in future efforts to bail out the indebted country, Herbert Stepic, Raiffeisen Bank International CEO, told CNBC.com on Thursday.
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The volatility caused by the debt crisis in the weakest euro zone members – Greece, Portugal, Ireland and Spain – is a big problem, as is the weak growth in the US, Stepic said in an interview on the sidelines of the World Economic Forum on Europe and Central Asia in Vienna.
Raiffeisen Bank International was part of a group of foreign banks which, at the height of the crisis in Central and Eastern Europe in 2009, had pledged not to withdraw funds from the countries so as to help keep them afloat, in an agreement that became known as the Vienna Initiative.
Two years later, the region is doing much better, Stepic said.
"Our biggest problem is not the countries in CEE at the moment but it's the volatility of the markets as a consequence of the crisis of the peripheral countries within the EU," Stepic said. "That's the big problem, and also of course the ailing growth in the United States."
"My opinion is that EU decision makers cannot allow to let Greece to default," he said, adding that the benefits of saving Greece "by far outweigh the disadvantages."
"There should be a further stretching of the refinancing for Greece also beyond 2014, and I am absolutely sure that they will make it," Stepic said. "At the same time they should insist and decide on very clear control mechanisms and sanctions for the future."
Many analysts have predicted that a restructuring of Greece's debt will not happen before 2013 and that the EU will try to find a solution to bring about an orderly reorganizing of debt repayments rather than deal with a messy, disorderly default.
Officials and analysts have said private holders of Greek bonds should take part in future rescues measures, and Stepic said bondholders are probably starting to price this possibility in.
"That is a change of the equation. I think they became familiar with the idea and I think they are including it in their calculations now," he said.
In the regions where Raiffeisen has expanded, CIS countries such as Russia and Ukraine are leading growth – with rates between 4.5 percent and 5 percent - followed by CEE countries like Poland and Slovakia with average growth rates of 3.6 percent, Stepic said.
South Eastern European countries are "lagging behind" and the need for investment and industrialization is "definitely a must" in those countries, he added, but even there the rates of growth are forecast at around 3.5 percent for next year.
"We are doing very well. Growth through the current business year is above budget, above the expectations of analysts … so I am very happy," Stepic said.