Fallout in the Balkans?

Thu, Feb 09 2012

Fri, Mar 05 2010 10:01 CET

byClive Leviev-Sawyer

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CENTRAL: With Greek banks having expanded throughout South Eastern Europe, countries in the region are worried about lending trends in the immediate future; while some in Greece are worried about the foreign policy implications of the Greek crisis.

There was a time, not long ago, when the story of banking acquisitions and consolidation in South Eastern Europe was that of a contest for conquest between Greece and Austria, with players such as Italy and Hungary also in the game.

Now, the results of that contest – as far as it got before the global financial and economic crisis took hold – are being watched with concern by a number of countries in the region.

Banks, of course, are among the most decisive players in the economies of countries in Greece’s neighbourhood, but a more general source of worry is the wider implications of fallout from a downturn in Greek investments.

As Athens sought to negotiate with the European Union and its most influential individual members about steps to decrease Greece’s deficit, it is certain that whatever political rivalries or outright tensions there may be, leaders in other capitals were likely to have been willing the Greeks success. A lot of jobs ride on it.

In Bulgaria, Finance Minister Simeon Dyankov spoke publicly about his concerns about a possible drain of Greek banks operating in Bulgaria, and said that he had sought technical assistance from European financial institutions to look into the issue.

"We expect to get a reply in the next three weeks. Or else I will continue to worry even more," Dyankov was quoted by Bulgarian news agency BTA as saying on March 1.

Within a few hours, Postbank, of which Greece’s EFG Eurobank is the main shareholder, had issued assurances that no draining was going on, while at least one other bank – which declined to be identified in a report by Bulgarian daily Dnevnik – gave similar assurances.

Giving credit
Concerns were not limited to Sofia.

In Romania, EFG Eurobank controls Bancpost, the National Bank of Greece (NBG) is the majority shareholder in Banca Romaneasca and, among others, Alpha Bank and Piraeus Bank are also present. As in Bulgaria, the credit ratings of Romanian subsidiaries of EFG Eurobank and NBG were downgraded by Fitch on February 24.

As it is, bilateral trade between Greece and Romania saw a significant downturn because of the global financial crisis, decreasing by more than 22 per cent between the end of the third quarter of 2009 and the same point in Q3 2008.

Going by a report in Bucharest daily Financiarul, Greek and Romanian business people seemed determined not to allow the reverse to continue, and Bancpost chairman Mihai Bogza told a business forum that his bank would continue to lend to SMEs that wanted to build bilateral trade ties.

At the same forum, there was a similar message from Greece’s ambassador in Bucharest, Georgios Poukamissas, who said that a pragmatic approach was called for, that would see the two countries working together to get through the crisis. The position of Greek banks in Romania was strong, Poukamissas said, and the banks were not influenced by economic pressure from Greece, enabling them to help SMEs in both countries, he said.

Bilateral blues
The best-known issue between Skopje and Athens is the long-standing dispute about the use of the name Macedonia, but at the same time Greece is a powerful player in the economy of its neighbour, no matter how fraught the political problems.

Macedonia is especially vulnerable; hardly boasting a powerhouse economy in the first place, it has reached unemployment reportedly of more than 30 per cent, while new official figures show CPI inflation at 1.9 per cent higher in February 2010 than it was in the same month the year before. Notably, all food prices – vegetables, fruit, fish, dairy, processed meat among them – were up.

On March 1, Balkan Insight reported from Skopje that trade between Macedonia and Greece had plummeted in 2009. By the end of Q3 2009, Macedonia’s exports to Greece were 160 million euro, down from 340 million euro in the same period of 2008.

For all that, Macedonian finance minister Zoran Stavreski insisted that he did not expect "serious negative influences" from the Greek crisis, saying that his country "with its business environment and low taxes, provides good conditions for the Greeks and other investors".

Serbians are likely also to be watching developments in Athens with concern. In Serbia, Greek banks provide more than 10 per cent of loans. By no means on unshakeable ground in economic terms, Serbia saw in 2009 its local currency, the dinar, lose about seven per cent in value against the euro, which while on paper could enhance Serbia’s attractiveness as an investment destination, is making it difficult for some Serbians to repay euro-denominated loans.

Unemployment in Serbia has been worsening, with official joblessness at 16.6 per cent, this figure having been reached after a jump of 2.9 per cent between December 2009 and January 2010.

With several countries dependent, significantly or in part, on Greek recovery and stability, concern was expressed at another level – this time political, not economic – about the fallout from the current crisis.

In a commentary on March 1, leading Greek daily Kathimerini assessed what it saw as the possible foreign policy implications of the crisis in Greece.

"There is no doubt that a Greece that is evidently weakened in European institutions such as the European Commission and the European Parliament, will have significantly less political capital to press for diplomatic solutions to its liking. If Greece does not act quickly to restore confidence in its economy, the country’s diplomatic clout will be similarly undermined," the daily said.

Advocating that Greece, struggling economically, could turn the tables by surging ahead with diplomatic initiatives that could bring the region’s peoples together, Kathimerini said: "A weaker, poorer Greece will mean a weaker, poorer Balkans".