(Adds Polish PM on currency interventions, paragraph 12)
By Gareth Jones
WARSAW, Feb 4 (Reuters) - Currencies across Eastern Europe tumbled, Romania cut interest rates and a ratings agency warned of risks facing Hungary on Wednesday as the impact of global recession intensified in the region.
Poland, the European Union's largest former communist member, ruled out intervening to rescue its plunging currency for fear of squandering precious foreign exchange reserves at a time of economic crisis.
Protests flared again in the region as Bulgarian farmers blocked a Danube River border crossing with Romania, demanding subsidies and protection from cheap farm imports in a rally that mimicked protests in Greece.
Foreign investors fleeing a region now perceived as too
risky drove Poland's zloty
Investors fear that declining manufacturing output across the region, which is heavily dependent on exports to a euro zone now deep in recession, will hammer tax revenues and force spending cuts that will further squeeze demand in a vicious downward spiral.
Ratings agency Moody's said the gloomy outlook posed a risk to Hungary, which late last year clinched emergency loans from the International Monetary Fund and EU aid to avoid an economic meltdown.
"The negative outlook on Hungary and every other country indicates that the likely direction in the medium term is towards lower rating," Dietmar Hornung, senior analyst at Moody's Investors Service in Frankfurt, told Reuters.
Moody's is content for now with Budapest's rating, he added.
The heavily indebted economy of Hungary is expected to shrink by up to 3 percent in 2009.
Plunging currencies compound the woes of Polish, Hungarian, Czech and other consumers saddled with loans denominated in euros, which in turn raises the risks to the region's mostly foreign-owned banks.
NO INTERVENTIONS
In Poland, still among the region's stronger economies, central bank head Slawomir Skrzypek, the economy minister and head of government all said they saw no reason for market interventions to underpin the zloty.
"Interventions today could have the opposite effect ... it would be using public money without a guarantee that it would work. Today, most experts advise not to do it," Prime Minister Donald Tusk said in an interview on TVN 24.
Poland's centre-right government unveiled plans on Tuesday to find savings worth 19.7 billion zlotys ($5.4 billion) in the state budget.
Defence Minister Bogdan Klich said on Wednesday Poland would withdraw its troops from peacekeeping missions in Chad and the Middle East in a decision expected to save 2 billion zlotys.
Polish economic growth is expected to slow this year to below 2 percent from 4.8 percent in 2008.
Slovakia's growth will drop sharply to 2.4 percent this year, below a previous forecast of 4.6 percent, cutting state revenues and boosting the fiscal deficit, Finance Minister Jan Pociatek said.
In Romania, the central bank cut interest rates by a quarter point to 10 percent, easing the cost of money for the first time in 19 months as cash shortages squeeze its economy.
Economists say Romania, which joined the EU along with southern neighbor Bulgaria in 2007, faces possible recession or even a financing crisis if the new government fails to convince investors it is serious about shoring up the state budget.
The Czech Republic, facing the possibility of zero growth this year, is also expected to cut rates on Thursday, following the example of Poland and Hungary last month. But cutting borrowing costs also piles further pressure on currencies.
The worsening economic situation has recently stirred protests in Greece, Bulgaria, Latvia, Lithuania, Iceland and Russia. On Wednesday, Bulgarian farmers shut down the Danube bridge link with Romania to protest against falling farm prices.
Russia has been especially hard hit by the flight of foreign capital from global emerging markets. On Wednesday, the Fitch ratings agency downgraded Russia's sovereign debt. (Reporting by regional bureaux, writing by Gareth Jones, editing by Tom Hals)