Greek Financial Crisis: Balkan Aftershocks?

James Pettifer, April 2010

The World Today, Volume 66, Number 4

The Greek financial shock has rippled across its hinterland. Solutions for Balkan states may be unappetising: crime and corruption are rampant. And once again, ethnic politics are returning to centre stage.

Balkan neighbours are looking southwards to sunny Greece after the hardest winter for many years with a mixture of schadenfreude and anxiety. The sight of the big neighbour economy reeling under the impact of the debt crisis is refreshing for some after so many years when this NATO and European Union (EU) member was held up an example of European development, as opposed to the messy and sometimes violent post-communist years in the Balkans.

As in late Ottoman times, Greek capital exports have been a main motor of economic development. Some neighbours - Albania, Macedonia and Bulgaria - have swathes of local financial capital under Greek influence and control. Greece has also been an important source of funds for post-Slobodan Milosevic Serbia and has stakes in major enterprises in Romania, Moldova and Russia itself.

Although local financial regulators in say, Albania - where approcahing half the banks are Greek controlled - claim they are independent and not vulnerable to capital withdrawal to prop-up Athens-based parents, the reality is more complex. All anecdotal evidence suggests that bank lending slowed to a snail's pace last year and almost stopped altogether in many institutions. The construction industry, the main motor of economic development, has been hardest hit, small local enterprise less so.

Balkan banks did not get involved in complex debt instruments and most banking is simple and traditional, but it has been the main instrument of modernity, just as Greek banks were in Ottoman times. There are also disturbing resemblances to the post-Wall Street Crash period. Then the crisis was slow to hit the nations of southeast Europe but when it did, post-autumn 1930, the force was very severe.

In most countries now, there is strong and continuing input by the international financial institutions, for obvious reasons. This applies particularly to Albania which experienced an armed uprising in 1997. It has been most evident in Macedonia which, almost alone in the region, has for some years held a fixed currency peg between the dinar and the Euro.....

http://www.chathamhouse.org.uk/publications/twt/archive/view/-/id/2015/