Southeast Europe braces for potential Grexit

By bne IntelliNews July 6, 2015

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Southeast Europe is bracing itself for the impact from a potential Greek exit from the Eurozone after its southern neighbour voted “No” vote in a referendum on whether to accept the austerity measures demanded by the rest of the Eurozone in return for a financial bailout.

"We have a lot of assets, we have many Greek banks here. We know well that this could also hurt us," said the acting Romanian Prime Minister Gabriel Oprea, according to Mediafax.

Speaking as it became clear that the ‘No’ camp had won, a spokesman for the Romanian central bank told domestic television station TVR1 that the vote could trigger some volatility in Romanian markets, but that it should not cause major concerns in the short term. "Obviously, there will be some volatility in the market," he said, according to Reuters, but added: "Such an outcome would not trigger big concerns in the short term."

Albanian media reported that the ‘No’ vote may quash the country’s plans for a €300mn Eurobond issue later this year, which is supposed to refinance the country’s Eurobond maturing in November 2015. According to Albanian news outlet Monitor, the country’s finance ministry is developing alternative plans for debt repayment, which could include taking an international loan of some €200mn-€250mn or relying on domestic short-term instruments, which could increase domestic borrowing to €250mn.

Bloomberg, citing sources, reported that the European Central Bank (ECB) will likely extend a backstop facility to Bulgaria to prevent contagion from Greece. The ECB is set to allow access to its refinancing operations, supplying euros to the banking system against eligible collateral. Greece is Bulgaria’s third-largest investor and the country’s fourth-largest export destination.

"An extension of the facility by the ECB would be a very important positive development. It would provide the Bulgarian central bank with the necessary euro liquidity to deal with a possible bank-run against Greek-owned banks, which is probable in the event of a ‘No’ vote in Sunday's Greek referendum. We hope that similar facilities will be made available to other central banks in the region," Demetrios Efstathiou, head of CEEMEA Strategy at Standard Bank, said in an email comment to bne IntelliNews.

Greece’s top three lenders – National Bank of Greece (NBG), Piraeus Bank, and Eurobank Ergasias – have subsidiaries in Bulgaria, while the fourth biggest bank, Alpha Bank, operates in Bulgaria through a locally registered branch.

Serbia’s Finance Minister, Dusan Vujovic, said Serbia is ready to withstand any shocks that might arise from the ongoing crisis in Greece, adding that his ministry and the central bank have a contingency plan for the worst-case scenario, which according to him is highly unlikely.

“It is difficult to say whether the crisis in Greece will deepen and what the effects will be but we are ready for all real shocks,” Vujovic was quoted as saying on June 4 by news agency Tanjug. “We have contingency plans but they are not announced publicly just as the plans concerning the response to a war threat are not announced; however they exist, they are realistic and have been agreed with the international institutions.”

Serbia’s central bank already imposed limits on transactions between Greek-owned banks in Serbia and their parent banks on June 29.

Slovenian Prime Minister Miro Cerar told a news conference on July 6 that Slovenia respects the vote of the Greek citizens in the July 5 referendum. “The Slovenian government will continue to show solidarity with the Greek population, providing it with as much help as it is capable of and is allowed within the existing rules and mechanisms,” he said.

Slovenia’s exposure to Greece is mainly via its participation in the various funding mechanisms that the EU has created so far to help Greece restructure its debts. According to a July 6 report of daily Finance, in the worst-case scenario Slovenia will lose between €930mn and €1.4bn (the money it has lent to Greece), which would have a serious impact on the country’s budget deficit.

Cerar added that he will take part in the Brussels summit on July 8, when EU leaders expect to receive and discuss the new proposal of the Greek government on how to solve the current crisis. 

With its currently directly linked to the euro, Bosnia could be impacted strongly by any major fluctuation in the euro as a result of the ongoing Greek crisis.

Meanwhile, Macedonia, which many consider most at risk from any spillover from the Greek crisis, does not as yet plan any new measures to protect the country’s financial system following restrictions placed on capital outflow from Macedonian banks into Greece last week.
“We will monitor the situation with the solvency of the Greek banking sector and we will react if necessary,” Dimitar Bogov, the governor of Macedonia’s central bank, told local media.

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