Greek crisis may wound southeast Europe

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FDI stifled

Another problem is foreign investment in general. In Romania, it almost halved to 4.9 billion euros in 2009, from 9.5 billion a year earlier. Greece ranked sixth in FDI at the end of 2008, with a share of 6.5%.

Investment from Greece to Bulgaria also plummeted last year to just 48.5 million euros in 2009, or around 2% of FDI, from around 7%, or 400 million a year earlier.

In Serbia, FDI fell 60-70% last year to 1.5 billion euros, and while Greece's part was roughly flat at 46 million euros, it was well below the pre-crisis 336 million euros seen in 2007, central bank data showed.

On top of the region's own troubles -- which forced Bucharest and Belgrade to grab International Monetary Fund-led rescue loans to avoid worst crises last year -- another thing that is not likely to boost confidence is their simple proximity to a country investors now treat with more caution.

"The Greek troubles and the Romanian situation send worrying signals. This all affects investor mood and the ability of the country to attract fresh capital," said Kiril Avramov, of the Political Capital think tank in Sofia.

Romania's economy is expected to grow by around 1.3% in 2010. Bulgaria's is still on shaky ground, with economists and the government seeing GDP growth at just 0.2-0.3%.

Capital Economics is more pessimistic, seeing Romania's GDP staying flat this year and Bulgaria's economy shrinking a further 1.5%.

That means investors looking to tap emerging Europe's recovery may shift money to more stable countries like Poland, the only European Union state to avoid recession last year, or those with limited Greek exposure including the Czech Republic.

"Obviously more central European countries are less exposed to the Greek problems, as the impact is only indirect," said Miroslav Plojhar, an analyst at JP Morgan.

"From this point of view, all other countries are much safer than Romania and Bulgaria."