Published on Sun, Mar 14, 2010 at 07:26 | Source : Reuters
Updated at Sun, Mar 14, 2010 at 07:43
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Greek crisis may wound southeast Europe
The Greek debt crisis is poised to undermine already dwindling investment flows into south-eastern Europe's emerging economies, adding to barriers to recovery in one of the continent's most fragile regions.
The Greek debt crisis is poised to undermine already dwindling investment flows into south-eastern Europe's emerging economies, adding to barriers to recovery in one of the continent's most fragile regions.
Greek lending in central and eastern Europe is concentrated mainly in Romania and Bulgaria, both struggling to recover from sharp economic contractions and most exposed to any scaling back in funding as Greece's banks shore up their own finances.
Greece has been a major investor in the region -- it is the second biggest in Serbia -- since the fall of communism in 1989. Its problems have so far had only a limited impact on nearby states and it is unclear how much of a drag it may create.
But the European Bank for Reconstruction and Development warned last week of potential hits to bank systems and economies and analysts have also raised concerns.
Greek firms are also not expected to invest heavily in their usual target areas as they digest severe government cost cuts at home, while simple proximity to a country that has become the latest trouble spot on investors' radar may also be an issue.
"I think there's a very real risk, actually," said Capital Economics analyst Neil Shearing. "You may not get wholesale retreats from Romania and Bulgaria but you're not going to get an increase in flows, certainly."
By comparison, Greek banks and firms have little major activity in the European Union's emerging states further north and West like Poland, Hungary and the Czech Republic.
