The contagion in Central and Eastern Europe has been called the worst economic crisis since the collapse of communism. And with Western European countries balking at more proactive fiscal and monetary policy measures, financial advisors should bear in mind that some professional investors worry that any recovery could lag the United States by 12 to 15 months.

Particular concerns include the continued pressure on the currencies outside the eurozone; massive overborrowing; high current-account deficits; and high budget deficits.

To understand the seriousness of the situation in Central and Eastern Europe, think of the region in tiers of vulnerability. Poland, the Czech Republic and Hungary would be in the first tier of countries that are vulnerable, but appear to be in the best relative shape.

Tier two would include countries like Romania, Bulgaria, and even Serbia and Croatia, which have less liquidity and fewer tools to deal with their economic problems.

The third tier would be Baltic republics like Latvia, Lithuania, Estonia and Ukraine, which are in total shambles and cannot survive without aid. Latvia has already received International Monetary Fund (IMF) assistance. So has Ukraine, which posted the best global return of any market in April, albeit on scarce volumes and extreme illiquidity.

Hungary, one of the first emerging market countries to suffer from the fallout of the current global financial crisis, has taken more encouraging steps than the tier-two and tier-three countries I mentioned. By the end of 2007, Hungary's external debt amounted to 97% of Gross Domestic Product.

Since then, the country replaced the prime minister and has undertaken a number of stabilization initiatives with an eye toward eventually switching from its present currency, the forint, to the euro. Last November, the IMF approved a $15.7 billion loan, as part of an overall $25 billion package that also included an $8.4 billion commitment from the European Union and $1.3 billion from the World Bank.

Russia, on the other hand, is in the throes of an economic crisis driven by the global credit crunch and the falling price of natural resources, particularly oil, its main export. The country's banking system is also a huge problem. In addition, corporations have a large number of loans that will need to roll over this year, and it is hard to imagine which Western banks will be willing to provide the necessary credit.

As a possible historical guide, recall that Brazil suffered a similar situation in 1998. While government debt was a problem, the bigger issue back then was corporate debt. Brazilian corporations were basically shut out from access to capital-crowded out by their own government and unable to roll over their debt. And that immediately affected the economy as a whole.

Now Russian banks supported by the central government themselves will have to help out their nation's economy, which will likely create additional strains on the ruble. I am not expecting the IMF or any European or U.S. institution to come to the aid of Russia.

However, Russia is considering large foreign-denominated sovereign bonds in order to supplant diminished foreign exchange reserves and fuel the recovery. With stabilization in oil and commodity prices, Russia might be able to succeed, but investors need to be aware that the corporate debt problems in that nation are probably at least equal in magnitude to the subprime mortgage problems in Europe or in the United States.

Against that backdrop, I believe last winter's widely publicized fears that Central and Eastern Europe's problems could bring down Western Europe were overblown, given the number of countries that did move toward more comprehensive and coordinated bailout policies.

Particularly encouraging is the fact that the IMF is poised to intervene more quickly than it has in the past, when helping troubled emerging markets was fraught with delays.

The IMF is increasing resources to address the global financial crisis in the form of Special Drawing Rights (SDRs), which is the IMF's internal currency, based on a basket of currencies: the dollar, the pound, the euro and the yen.

While there are concerns that most of the new SDRs will go to so-called developed countries as opposed to emerging markets, which are in dire straits, the IMF may be able to provide additional and financial support by selling bonds to its members.

Meanwhile, with recent surveys showing a pickup in economic activity, such "green shoots" have calmed the credit and equity markets, and that may bode well for a recovery by the end of the year and less aggressive policy responses.

Yarek Aranowicz, CFA, is a member of Lord Abbet's international equity team. He joined the firm in 2003 from Credit Suisse Asset Management.