Behind what used to be the Iron Curtain, an economic renaissance has been quietly brewing for the past 15 years. China, India, Brazil and nearby Russia get more press, but some of the most impressive emerging economies of the world are in Eastern Europe.

If you think about it, that's not surprising. With well-educated populations, diverse industrialized economies and, in many cases, impressive natural resources, the economies of Eastern Europe were great candidates to grow rapidly as they transitioned fully to capitalism.

Consider geography, for one thing. Eastern Europe is beautifully situated between wealthy Western Europe and the growing Russia -- a country whose economy has boomed in recent years, aided by its vast oil resources.

Eastern Europe also is attracting a good deal of direct investment from overseas thanks to its most valuable resource: inexpensive skilled labor. With well-educated populations used to relatively low wages, Eastern Europe has benefited from outsourcing of all sorts of jobs once held by workers in the U.S., Western Europe and elsewhere. Skilled labor is available for -30-50% less in Eastern Europe than in those more-developed regions.

Another plus: many of the formerly communist eastern states are now members of the European Union. As part of EU membership, Eastern European countries' formerly stringent travel and labor restrictions are falling, allowing citizens to move freely across borders -- and workers in these nations to gain employment in other countries of the EU.

Better yet, these newest members of the EU are the direct beneficiaries of EU aid funds designed to help their economies catch up with those of Western Europe. For example, most economists believe that in 1991, about one year after Germany was re-unified, the formerly communist East Germany had a GDP per capita of only 31% of the level that prevailed in West Germany. By 1999, that ratio had risen to only about 55%.

Europe is offering a number of programs designed to help bridge that wealth gap -- known as "cohesion funding." These include near-total financing for infrastructure projects like roads and modern water and sewage facilities. So-called "structural funds" are also available for projects as diverse as workforce training and rural development.

As the chart shows, forecasts indicate a steady growth in EU spending on cohesion funds for emerging European nations. These represent an increasingly large shot in the arm for Eastern European economies -- and, by extension, their stock markets.

And, all of the new EU states are expected to eventually join the euro currency bloc. To adopt the euro, these states need to meet certain stringent fiscal criteria covering factors such as government spending, inflation, and accounting standards. So the developed western states are not only offering aid, but also building developed financial and political standards.

For all these reasons, Eastern Europe has been booming compared to the U.S., Japan and the rest of Europe -- and the strong growth is expected to continue in most countries. 

As in most strong-growth economies, many successful companies are taking their excess cash and investing it in further growth rather than paying it out in the form of dividends. However, we've identified some very attractive high-yield stocks and funds operating in this region.

Now is a particularly great time to buy attractive high-yield securities focused on Eastern Europe. Like stock markets elsewhere in the world, Eastern European bourses sold off sharply in January. This has created inexpensive valuations and higher yields for shares of some market-leading, well-positioned companies and funds.

Important Note: In the remainder of this article, High-Yield International editor Nick Lanyi profiles two of the top income-producing Eastern European securities available. Yielding 9% and 21%, these two investments, along with all the others Nick researches on a monthly basis, will add stable income and diversity to your domestic holdings. However, in order to view the remainder of this article, you'll need to subscribe to our premium international income investing newsletter -- High-Yield International. After you subscribe, you'll receive immediate access to this full article, as well as our monthly High-Yield International newsletter and a host of additional premium content. Please visit one of the following links to continue. . .
 

Nick Lanyi
Editor
High-Yield International
http://www.StreetAuthority.com

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