Greek crisis raises concerns among Balkans

The governments in the Balkan region are concerned that the Greek financial crisis could have spill-over effect on the Balkan countries, and will continue to affect the region in the medium and long term.

With EUR 240 billion economy, Greece is an important regional driver and investor in the emerging economies of South-East Europe. Economists are concerned that the financial downturn in Greece is likely to cut intra-regional trade.

According to figures of the IMF Trade Statistics Directorate for the year 2008, Macedonia would be the hardest-hit, as Greece accounted for around 14 percent of exports and 9.5 percent of imports there.
Albania is likely to be the next most-exposed country given that Greece accounted 11 percent of exports and 10 percent of imports. This would be followed by Bulgaria with 8 percent of exports and 4.8% of imports derived from Greece.

A substantial amount of foreign direct investments (FDIs) have flowed from Greece into the Balkan economies in the past decade. Therefore, the negative impact of Greek crisis on its Balkan neighbors will be unavoidable as the country plunges into the red.

In Serbia, 14 percent of FDIs flow from Greece. Greece’s direct investments in Bulgaria and Romania stand at 8 percent.

Economists say Greek investments in banking sector in the Balkans are at highest risk.

The total sum of loans from Greek banks amount to $57 billion – $19 billion in Romania, $18 billion in Turkey, $9.9 billion in Bulgaria, 1.9 billion in Albania, and 1.7 billion in Macedonia.

Although the largest Greek banks signed the so-called Vienna Initiative, an IMF-coordinated agreement for western banks to stand by their Central and Eastern European subsidiaries, economists reckon that the crisis could result in liquidity squeeze at home and abroad.

Economists also caution that Greek crisis could have knock-on effects for countries wishing to join the eurozone. It may cause countries to reconsider their desire to quickly join the single currency zone. The euro-zone members, on the other hand, may be loath to admit new members into the club.