Greek crisis, Balkan repercussions

by Andrew MacDowall

Financial Times
June 12, 2012

The ongoing crisis in Greece, and the possibility that the country will abandon the euro, is widely seen as presenting an existential threat to the eurozone. But it is also having an impact on Greece’s southeast European neighbours, which are not in the euro but are closely linked to Greece through Greek foreign investment and the financial sector.

But reports differ on the effect of the deepening Greek crisis on the region, and indeed on what would happen in the case of a “Grexit”. The shape and extent of the regional fallout is one of the many “known unknowns” of the unfolding drama.

Some recent reports have focused on the high exposure of SEE economies to eurozone countries, and particularly Greece, which is a major contributor of FDI to its northern neighbours. The substantial chunks of regional banking markets held by Greek institutions – around 24 per cent of assets in Bulgaria and a sixth in Romania and Serbia – are also of concern because a pullback by Greek owners could well create a liquidity crunch in these countries.

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