S&P: Wider Greek danger

The run on Greece’s lenders could have serious economic effects on neighbouring countries too, Standard & Poor’s has warned.

Thu, 25 Jun, 2015 - 01:00

Eamon Quinn

The ratings agency yesterday said that Greek banks have significant operations in Bulgaria, Macedonia, Albania, Romania and Serbia, and any blow to the Athens-owned lenders could knock the economies of the wider region.

In a credit briefing, S&P reveals that Greek banks have market shares of 15% of the banking systems in Romania and Serbia and hold more than 20% shares in Bulgaria and Macedonia.

As depositors continue to flee Greek banks, the European Central Bank this week lifted its cap in emergency liquidity assistance, it provides to the country’s lenders by €1.1bn to about €84.1bn.

Like in Ireland during the banking crisis when lenders here were cut of from financial markets, the ECB has pumped in emergency liquidity assistance to Greece banks as depositors take their money out.

Some eurozone finance ministers had reportedly wanted the ECB not to lift the cap or delay injecting emergency liquidity assistance as a negotiating tactic to put the squeeze on Greece’s government to strike a deal over an extension to its bailout loans.

However, the S&P research suggests applying such political pressure could have serious knock-on effects on neighbouring countries, many of which though not part of the eurozone are nonetheless EU members.

“In our baseline scenario, we continue to think that Greece will remain a eurozone member. But the limited progress in talks to date between Greece and its creditors suggests a Greek exit is possible,” S&P said.

If Greece misses its end-month payments to the IMF, it could trigger a bank run, capital controls and an eventual Greek exit from the eurozone, undermining the foundations of the currency.

A series of street protests in Athens in recent days, some organised with the governing party Syriza’s support, have underlined public opposition to yet more belt-tightening.

“There are four people in my household, and we are living on €600 a month. Where else does that happen?” said 59-year-old Antonia Methoniou, a cancer patient who took early retirement.