More than 100,000 boisterous, carousing soccer enthusiasts jammed into Warsaw's Parade Square each day during last month's Euro 2012, following matches on giant television screens and reveling in the carnival atmosphere.

For the European tournament's co-host Poland, it was a coming-out ceremony, much like China holding the 2008 Olympics or South Africa hosting the 2010 World Cup. This was Poland's way of proclaiming its place in Europe as a modern, democratic, economically vibrant society.

Inside a high-rise building on the edge of the square, the mood was decidedly more measured. For the principals at Polish private equity firm Enterprise Investors, conversations centered as much on the fast-accelerating European Union debt crisis as on soccer, says Jacek Siwicki, the firm's president. He and his colleagues obsessed over the financial health of Spain and Italy just as much as fans on the square jostled over which of the two countries' teams would prevail in the cup's final. (For those who don't follow soccer, Spain massacred the Azzurri side 4 to 0.)

"We're on the 31st story of an office building talking about the crisis all the time," says Siwicki by telephone. But for the crowd, the crisis "seems to be somewhere else in the hemisphere. It's a fairly weird feeling. Thirty-one floors down, people don't pay any attention to the possible unraveling of the euro zone."

That kind of dual reality -- being both part of the European Union crisis, yet somehow apart -- marks the countries now being dubbed "Emerging Europe." These are Central and Eastern European nations, by some count 14 in all, almost all of which were vassals of the old Soviet empire. (The major exception is Turkey. See story, page 36.)

At the core of this Emerging Europe are Poland, Romania and Hungary, reflecting both the region's hopes and its considerable anxieties. All three are members of the EU, but not tethered to the euro currency, that is, not part of the euro zone.

These countries are dealing with their own dynamics, triumphs and tribulations. But the tumult in Brussels, Athens, Madrid, Paris and Berlin can drastically alter their economic future and financial fortunes, individuals such as Siwicki also understand. The question is how. "If we are touched by this crisis, it's as collateral damage, rather than being a main actor," says Carmen Peli, a lawyer in Bucharest, Romania. "We're not necessarily more optimistic. We're just hoping that anything which happens [in crisis-racked euro-zone countries] will not weigh us down much more."

This is Europe's other periphery. It understandably doesn't draw the headlines or the scrutiny of the debt-laden countries of Greece, Spain, Portugal and Italy. What happens within its borders over the next few weeks won't make or break the Continent. But by its very name, Emerging Europe is vital as a region of economic aspiration for the Continent and beyond. "There is a coming of age," says Siwicki.

Of course, if the euro zone were to disintegrate, all bets are off. The impact would be catastrophic. Short of that, and assuming the crisis will linger, the degree the euro-zone troubles can affect Emerging Europe -- and in particular investment flows -- is a matter of fierce conjecture.

A few warn of potentially dire straits. "In 10 years, Emerging Europe will do quite well," says Neil Shearing, the chief emerging-markets economist for London-based Capital Economics, a research consultancy. He then turns ominous: "Over the next two years, it could be quite horrible."

Others are far less gloomy: "Uncertainty will be tangibly visible the second half of this year," says Jaroslaw Bachowski, a Warsaw-based partner at the executive search firm Egon Zehnder International. However, he continues, "There will be a moment in six to 12 months from now when people realize, despite a high degree of uncertainty, the economics favor investing in a country like Poland."

Right now, much of Emerging Europe investment is in a holding pattern. "Every decision seems to be slowing," says Shearing. "The few bits of M&A activity are being pushed to one side."

That investment hesitancy shouldn't come as a surprise, says John Fitzpatrick, a partner with CMS Cameron McKenna SCA based in Bucharest. "The euro crisis has had a big impact on everything, including mergers and acquisitions. We'll do deals," Fitzpatrick believes, "just at a slower pace."

The debt crisis that currently grips Western Europe at the very least adds another level of uncertainty, just about everyone agrees. After the 2008 global financial catastrophe, Emerging European investment flows weakened. While Poland regained its investment-grade mojo, most others remained at best tentative. Then, the Greek debt crisis kicked into high gear.

"It's difficult to tell apart what are the effects of the euro-zone crisis and the effects of the renewed economic slowdown," says Gábor Hunya, senior research economist at the Vienna Institute for International Economic Studies. The results, he says, are the same: diminished investments.

Few believe the ongoing euro-zone crisis is potent enough to single-­handedly stop the flow of Emerging European investments. Many more fear the crisis could act to further retard action, or, worse yet, provide that final stone of doubt that blocks a deal, for either buyer or seller. "There's a dark shadow over investment activity," admits Bachowski, who remains generally upbeat about his country's future.

To be sure, Poland, Romania and Hungary vary significantly from each other. The impact of the crisis on each differs as well. "Hungary is probably hurting the worst, overall, but largely because of internal matters. Romania is hit more by the euro-zone crisis. In Poland, the effect of the crisis is surprisingly diminished," summarizes Todd Peterson, a New York-based lawyer, who specializes in emerging markets at Edwards Wildman Palmer LLP and practiced in Poland during the mid-1990s and early 2000s.

Poland has emerged as Europe's star performer and has held up quite well. Hungary and Romania are struggling to keep their economic heads above water.

Poland continued to expand, even in 2009 when other European economies contracted. In 2011, the country's gross domestic product grew 4.3%. This year, Poland expects 2.5% GDP growth, which sounds modest, but in Europe should top the charts. Part of that stems from a slowdown in Polish infrastructure projects, which peaked in the years leading up to Euro 2012. (New stadiums were built, but so were critically needed highways and airports, which should help attract more investments, backers believe.)

"People say Poland is a welcome island among European misery," says Zbigniew Zimny, a professor of international economics at the Academy of Finance in Warsaw.

Hungary and Romania, by contrast, are grappling with their own political and economic demons. Hungary's GDP contracted 1.2% during the first quarter of this year and is forecast to be flat in 2012. Romania's GDP dipped 0.1% in the first quarter and the country will be lucky to log any growth at all this year.

While the current uncertainty may translate into slightly diminished growth rates, Poland has so far shaken off most of the euro-zone blues. It continues to attract significant capital and investment flows. "One of the major motivations of investment is to capture local markets. In this respect, Poland has a big advantage because its growing economy sets it apart from most other countries in the region," says Hunya.

Last year, Poland posted a record $18.2 billion in M&A, according to the country's Ministry of Treasury. Those figures are somewhat deceiving, as they were skewed by some blockbuster deals. Most notably, Polish billionaire Zygmunt Solorz-Zak acquired for €4.82 billion ($5.93 billion) the country's second-biggest mobile operator, Polkomtel SA. More typical was London-based private equity shop Montagu Private Equity LLP, which paid €425 million for broadcasting infrastructure provider TP EmiTel Sp. z o.o.

Even before the euro-zone crisis worsened, the government predicted Poland's M&A activity would slow at least 10% in 2012 over last year. Still, deals continue. Earlier this year, for example, German insurer Talanx AG said it would acquire Poland's insurance company Towarzystwo Ubezpieczen i Reasekuracji Warta SA for €770 million and sell a 30% stake to Japan's Meiji Yasuda Life Insurance Co.

Marcin Majewski is a director with the Polish investment bank Augeo Ventures Sp. z o.o. He cites several buy-side mandates from Austrian, Spanish, Hungarian, Israeli and Lithuanian clients, all actively looking for acquisitions. That includes New Frontier Group, a Vienna-based IT consultancy that's ramping up its regional presence through acquisitions. Spain's Ferrovial Servicios SA is also on the hunt for waste management companies.

"True, in the last few weeks, there's been an increase in uncertainty, but in Poland, it is pretty much business as usual," Majewski says.

Part of Poland's advantage is its location. In the minds of many investors, Poland is distant enough that it isn't being lumped together with the problem countries of Western Europe. "We ­really don't compete with Spain, Portugal, Italy," says Siwicki. "I don't think Poland is competing for capital with Ireland or Greece. We're competing with Germany and Scandinavia."

In addition, Poland's own cadre of investors, including Siwicki's firm, has become more active in the region. Enterprise Investors, for example, started its private equity life in 1992 as a Poland-only fund. "Then, it became 'Poland plus,' " investing in Hungary and Romania as well, says Siwicki.

According to Securities and Exchange Commission filings, Enterprise Investors is fundraising for a projected $825 million Fund VII and, as of May, had raised $313.3 million. Enterprise Investors is wrapping up investments in its €658 million Fund VI. That includes a 2010 €23 million acquisition of an 80% stake in Netrisk.hu, Hungary's largest online insurance brokerage, with operations in Romania as well.

That kind of regional push is gaining traction among Polish corporate investors too. "Several companies have reached enough size and gained enough experience that they are getting more aggressive in their international expansion plans," says Majewski.

A study released in June by Poland's Institute for Market, Consumption and Business Cycles Research detailed a deepening appetite of Polish multinationals for global expansion. In part, the study concludes, this process is making up for lost time, as Polish companies lag other emerging-markets counterparts.

In an e-mail exchange, the study's author, Ewa Kaliszuk, says this kind of investment "has been quite resistant to the crisis, compared to other countries." She also notes that investment in "the neighborhood" and "cultural closeness" are both important factors. Countries such as Hungary and Romania provide "additional important pull factors, comprising a similar level of economic development, smaller competition, a cooperation of equals [and the] possibility of selling products under Polish brands."

For its neighbors, that increased interest from Poland was a godsend. "In our region, there was a big shift beginning 2009," says István Préda, the founder and managing partner at Budapest-based investment bank Imap MB Partners Srl. "In Romania and Hungary, the buyer interest before was mainly Western European. After Lehman, Western Europeans all but disappeared, and you saw the emergence of Central European buyers, including Poles and Czechs."

Préda sees this trend toward regional expansion as significant, especially during a time of uncertainty. "Central European buyers are more comfortable than Western Europeans," he believes. "It's easier to sell a Hungarian company to Polish investors than to a French buyer. Poland is more in tune with Hungary."

But, he's quick to add, that doesn't translate into anything remotely related to a resurgence in investment. "There has been a change in the Hungarian political culture that doesn't favor M&A," says Préda, whose operation started in Budapest in 2002 before expanding first to Bucharest and then to the U.S.

Both Hungary and Romania are beset by political and economic woes. For them, the euro-zone crisis may not itself be a major drag, but it adds another weight to the chain. "The crisis has just worsened the situation," says Róbert Kotsis, a Budapest-based lawyer for DLA Piper.

Hungary is in a shambles. The ruling right-wing government of Prime Minister Viktor Orbán has had little more success boosting the economy than its inept, left-wing predecessor. As The Economist pointed out in a blistering critique, the increasingly desperate government has turned to bizarre new tax schemes, including levies on junk food and telephone calls.

This decline contrasts with an investment bonanza Hungary experienced in the years preceding 2008. Property development boomed. German, Austrian and Italian developers all flocked to Hungary. "They went wild," Kotsis says.

Hungarian consumers turned equally exuberant. During the first half of the 2000s, they borrowed heavily for cars, apartments and other goods, often opting for loans in Swiss francs because interest rates were lower.

The net result was mammoth overbuilding, crushing debt loads and widespread distress. Retailer bankruptcies skyrocketed and vacancy rates soared. "It will take about a decade to grow into the existing stock," says Kotsis, who specializes in real estate.

Hungary's M&A reflects country uncertainty. According to a CMS Cameron McKenna report, relying on data by ISI Emerging Markets' DealWatch, Hungary-related M&A totaled only €3.9 billion, half of which was attributable to the Hungarian government's acquiring a stake in a major energy company. China logged the biggest acquisition by a foreign entity. Wanhua Industrial Group Co. Ltd. paid a total of €743 million for BorsodChem Zrt, a Hungarian chemicals company, part of a debt-to-equity swap and call option. The deal once again raised periodic hope that Chinese companies will provide a significant boost to M&A flow in the region, a yearning that so far remains largely unfulfilled.

With 2.5% GDP growth last year and International Monetary Fund projections of a 1.5% gain this year, the Romanian economy is arguably more stable now than neighboring Hungary. It was just as hard hit by the 2008 global crisis, however. Like Hungary, Romania enjoyed an economic and investment boom in the years before the crisis. Its economic growth averaged more than 6.5% annually from 2003 until 2008, fueled by foreign investors and consumer spending. That trajectory reversed dramatically, from a more than 9% gain during the first three quarters of 2008 to a 13% decline in the fourth quarter. A yawning current account deficit forced Romania to seek IMF assistance.

Foreign investment dried up and has been slow to return. Most deals completed in 2009 and 2010 were distressed, says Fitzpatrick. That began to change last year, although the euro debt crisis has put another crimp on investments.

According to the CMS Cameron study, 2011 M&A totaled just €1.3 billion, only 35% the amount registered in 2008. More than half the amount last year was attributable to bank and insurance deals.

Attorney Peli cites lack of private equity interest as one limiting factor. "We always hear about some interest, but it's not sufficient enough to influence investment decisions," she says, turning poetic. "It's like an eagle flying but not quite landing here."

Fitzpatrick and Peli cite energy as one sector where deals occur. Last year, for example, energy-focused PE firm First Reserve Corp. acquired for an undisclosed sum Houston-based Amromco Energy, Romania's third-largest gas producer. Spanish renewable energy powerhouse Iberdrola SA is on the hunt for possible Romanian acquisitions as well.

For sheer political drama, Romania is hard to beat, and not in a way that's necessarily conducive to investor ardor. In late June, former Prime Minister Adrian Nastase shot himself in the neck after being sentenced to jail for corruption. A month earlier, Nastase's leftist party toppled a center-right coalition in a no-confidence vote, marking the third change in government this year alone. For political power, new Prime Minister Victor Ponta faces off against Nastase's longtime, bitter rival, Traian Basescu, who was suspended by parliament on July 6 as president, pending impeachment proceedings.

In just about any conversation about the current woes -- or accomplishments, for that matter -- of Emerging Europe, the reference point isn't the Greek sovereign debt debacle in 2010, but the 2008 global financial catastrophe. For countries in Central and Eastern Europe, "the euro-zone crisis and the global [financial] crisis are difficult to separate," says economist Zimny. "The expected recovery didn't come," he says. That retarded "growth, demand, investment."

The 2008 global meltdown, in fact, hit several countries on the Continent's eastern periphery more than a year before Greece emerged as the flash point for European sovereign debt woes. In October 2008, for example, the IMF and EU fashioned a joint bailout for Hungary, the first for an EU nation. (Negotiations for a further €15 billion credit line have been stalled since the Hungarian parliament in December 2011 passed a law that restricted the independence of the country's central bank. The Orbán government last month introduced amendments to the law restoring safeguards.)

But none of these countries -- Hungary, Romania or even Latvia, which had its own crisis -- triggered the kind of contagion fears Greece has engendered. Part of this was a simple question of size. The Hungarian economy is only about 40% of Greece's and less than 10% that of Spain. Part was probably perception. With its population the size of Houston, Latvia wasn't about to take down all of Europe.

Then there's the issue of the euro. Because Emerging European nations have yet to enter the euro zone, their own currencies can float. That's proved to be a double-edged sword. Devalued zlotys, forints or leus can help attract investments, both in terms of costs of production and the assets themselves. But they can trigger as well serious loan repayment issues.

These currencies also have gotten caught up in the whole euro panic, in some cases devaluing more than they should through a kind of guilt by association. That could easily scare off potential deals with fears of diminishing value. "The Polish zloty has become very weak, even though fundamentals say it shouldn't," says Zimny, who adds, "When investors become nervous about marginal countries, they move to more secure investments, to countries they feel are safer."

That fear holds for those looking to divest as well. "The concern with sellers is there is more [inflationary] risk in holding cash than holding on to the company," says Majewski.

Investors must factor an increasingly complex calculus when weighing the relationship between Emerging Europe and the European heartland. Since the time eight years ago when many of these countries entered the European Union, investment decisions carried a kind of euro-zone advantage. Before the crisis, that could be substantial. A German-owned plant in Hungary, for example, could make auto parts duty free for Stuttgart car manufacturers. An Indian multinational could acquire a Romanian company and gain access to the entire EU.

That basic premise hasn't changed. But if investors turn bearish on the EU as a whole, the backdoor premium lessens or even disappears.

Even so, counters Kotsis, a country like Hungary is gaining competitive advantage with the uncertainty. Because of the falling value of the forint, the cost of production has fallen. Real estate is cheap. The labor force remains highly skilled. Infrastructure is well developed. "On the one hand, [Hungary] is one of the riskiest countries," he says. On the other hand, for a certain breed of investor, "it's a beautiful place to come to."

If there's one particular worry attached to the euro-zone crisis and Emerging Europe, it's a banking squeeze. In the years leading up to 2008, Western European banks moved aggressively into Central and Eastern Europe. Nondomestic owners hold a large proportion of banks in almost every country in this region. The most dramatic is Romania, where more than 90% of Romanian banks are in foreign hands, says Peli.

Greek financial institutions account for somewhere between a fifth and a quarter of all bank assets in Romania, according to one estimate. That list includes two of Romania's top 10 banks: Alpha Bank Romania and EFG Eurobank Ergasias SA's Bancpost SA. Since the 2008 crisis, these banks have become more independent and limited their lending to their local deposit base, which constricts lending but lessens the likelihood of a sudden credit crunch if Greek banks go under. Romanian banking authorities are keeping a watchful eye, and concerns linger that a run on banks in Greece could trigger a run in Romania as well.

Capital Economics' Shearing, for one, frets over the relationship between troubled parent banks in various Western European nations and their subsidiaries in Emerging Europe. With the possible exception of Romania, Emerging European banks are quite strong, sometimes far more so than their parents. Over the past six months, he points out, there's been a net outflow of funds from Emerging Europe to banks farther west. Romania looks to parent bank funding to make up a shortfall in local funds. Hungarian banks depend on credit lines from their offshore parents.

Poland has already worked out some of its problematic bank ownership issues. Last year, the bankrupt Allied Irish Banks plc sold a 70% stake in Polish bank Bank Zachodni WBK SA for $5.82 billion to Banco Santander SA. At about the same time, Austria's Raiffeisen Bank International AG bought a 70% stake in the smaller Polbank EFG SA for €490 million from Greece's EFG Eurobank Ergasias.

The growing crisis probably scuttled even more bank sales in Poland, Egon Zehnder's Bachowski believes. Three other banks unsuccessfully initiated the auction process in 2011.

"The problem was valuation. They were too high," Bachowski says. Rather than cut the price, "if the owner has no imperative to sell, he won't."

While the impact of the crisis on investment flows may differ from country to country in Emerging Europe, there is a risk factor, and that affects valuations across the board, say advisers. "It takes several months for the expectations of buyer and seller to converge," says Majewski. "There's a longer time than it used to be to reach an agreement."

Sellers, say Majewski and others, are weighing other factors, which are indirectly affected by the crisis. Because so many Polish companies began in the period around 1988 to 1991, their founders are now reaching retirement age in greatly heightened numbers. Hungary isn't far behind. Enterprise Investors' Siwicki says his fund alone has already made eight "succession-driven buyouts."

More and more successful companies are beginning to be shopped. As the debt crisis lingers, one big unanswered question is how long founders will wait for a significantly better price. Imap MB Partners' Préda puts it this way: "There's a realization that it's not going to get much better anytime soon. You're 60 years old. Will it be better to sell now than five years from now?"

Then there's the issue of limited partners in investment funds including PE. Siwicki refers to discussions with potential investors. "There's fairly strong polarization. Some don't want anything to do with Europe. Full stop. That group of investors has clearly got cold feet."

However, he continues, there's another group "with a higher risk appetite. They say, 'Yes, we want to keep doing investments in the EU.' " For them, Siwicki concludes, the emerging countries of Central Europe, and especially Poland, have become a prime target.