Albanian migrants continue to return to Albania, some to settle permanently, others waiting for better times to return to Greece
TIRANA, June 20 – Concern over the severe financial crisis in neighboring Greece is growing even in Albania as thousands of immigrants working there have lost their jobs– severely affecting remittances which remain a vital source of income for their families. Albanian migrants continue to return to Greece, some permanently and others temporarily until the Greek situation improves. Dozens of manufacturing businesses in southern Albania, which export footwear and clothing products to Greece, have also been severely affected by the escalation of the crisis, as it has resulted in a sharp drop in demand and payment delays.
“Many of the manufacturing businesses operating under contracts with Greece have been forced to work only seasonally, with workers working for three or four months and then making a forced break and resuming again,” Mustafa Devolli, the head of the Gjirokastra Chamber of Commerce told reporters.
Zef Preci, the director of the Albanian Centre for Economic Research told Deutsche Welle that apart from the negative effects, the crisis in Greece could also bring positive impacts, urging seasonal workers to stay at home and contribute to domestic production. “Qualified workers who have lost their jobs in Greece will return home as precious capital improving the quality of products and services especially in hotels and restaurants.”
However, Ervin Koci, an opposition Socialist Party lawmaker says the Greek crisis will bring only negative effects to Albania, increasing the unemployment rate and deepening the social crisis. According to him, Albanian immigrants cannot return home to open new businesses at a time when small businesses are already going bankrupt, Albanian consumers have become more pessimistic, and demand is falling. Koci says the Albanian economy risks having fewer investments from Greek businesses operating in Albania, while will likely begin transferring their profit to help the Greek economy.
Ilir Barjaba, another economic expert, says that the crisis in Greece, will affect exports, FDI, remittances and lending; since, there is a large share of banks with Greek capital in Albania.
Calling on Albanian authorities to draw lessons from the Greek crisis, he said the Albanian government should not focus only on infrastructure investments if it entails neglect of other sectors of the economy.
Referring to the 1980s situation in Greece, Barjaba says Albania finds itself in a similar situation.
“Greece achieved its goals, borrowing from international financial institutions and banks but these funds mostly served for infrastructure development, neglecting other sectors of the economy. Therefore they did not have any impact for a healthy economy. I think the over-investments in civil infrastructure in Albania is a similar case, because it is not fair to neglect other sectors of the economy– especially industrial areas,” said Barjaba.
Expressing his disappointment with the May 8 local elections in Albania, political analyst Tim Judah said recently the ongoing political crisis would also impact the economy.
“Albania will have to wait two other years, after having wasted the same amount of time. These years that Albania is losing, diminish the credibility of your country. This means that a country without credibility is a country with fewer foreign investments. Lack of foreign investments means fewer jobs for the Albanians. I would add that this is happening in a very bad moment, seeing the events with your Greek neighbors. How will the Greek crisis be reflected on the hundreds of thousands Albanian emigrants that live there, when they are facing fewer jobs and are returning home? All of these, put together, create bad news for Albania,” Judah told Top Channel TV recently.
Bank of Albania data show exports to Greece dropped to 56 million Euros in 2009 and 62 million Euros in 2010, down from 80 million Euros in 2008, just before the crisis broke out.
Meanwhile, Albanian imports from Greece have also been in decline since 2008 when they reached a record 524 million Euros. Imports from Greece in 2009 fell to 505 million Euros and 459 million Euros in 2010.
As elsewhere in the region, Albanian banks witnessed substantial panic deposit withdrawals in the face of spillovers from instability of global financial markets, which were compounded by concerns about the health of the Greek banking system in 2008.
EBRD: Albania remains vulnerable to Greek crisis
As the financial crisis in neighboring Greece escalates, the EBRD, one of Albania’s biggest financiers, warns the country is particularly vulnerable to a serious Greek downturn. In a report called “Regional economic prospects in EBRD countries of operations” published in May 2011, the EBRD reiterates that Albania remains seriously endangered by the Greek crisis “as the majority of remittances into Albania come from migrants in Greece, many of whom work temporarily in seasonal jobs.” However, the EBRD report also says that Albania was the Western Balkan country with the highest growth rate of 3.8 percent in 2010. “The key macroeconomic risk in Albania stems from potential spillover effects from Greek crisis, mostly in the form of falling investment, lower remittances, higher costs for local subsidiaries of Greek banks and reduced trade flows,” said EBRD in an earlier 2010 Transition Report. Experts had previously predicted that Albania would be the hardest hit country from the crisis because of the size of Greek investments and the large Albanian migrant community in Greece– whose remittances are a major source of revenue for many Albanian families. Around 46 percent of immigrants sending remittances are reported to living in neighboring Greece, compared to 41 percent in Italy, according to a central bank survey. Albania has more than 600,000 immigrants in Greece, who make up 10 percent of Greece’s total workforce. Greece is currently the top foreign investor and the second largest trade partner after Italy since the early 90s. Greek businesses are present in almost every sector of the Albanian economy, including strategic ones such as telecommunications, banking, energy, industry, construction, trade and tourism; which significantly contribute to the country’s economic growth.
New businesses open in Gjirokastra
The financial crisis Greece has been experiencing during the past two years has caused many Albanian migrants, mainly from southern Albania, to return home and open their own businesses in Albania. Sources from the Gjirokastra Chamber of Commerce and Industry say some 48 new businesses have opened in the Gjirokastra region during the past 17 months– mainly by former migrants to Greece who returned home after losing jobs and being unable to find new ones. Sources said that 25 of the businesses, which opened during the first five months of this year, mainly operate in the production sector. Many of the businesses operate in garment and footwear production, where increased interest has been reported by domestic and foreign investors following a government decision to remove the 12.5 percent customs duty for this sector earlier this year.
Impact of Remittances, FDI dropping
Migrant remittances suffered another blow during the first quarter of this year as Albanian immigrants continue to face the ongoing economic crises in their host countries– mainly Greece and Italy, where around one million Albanians live and work. Latest central bank data show remittances dropped to 153 million Euros in the first quarter of this year, down from 170 million Euros during the same period in 2010– registering a 9 percent decrease year-on-year. Meanwhile, foreign direct investment registered one of its lowest quarterly levels during the first three months of this year dropping to 57 million Euros, down from 166 million Euros during the same period a year ago. The drop of 65 percent during the first three months of this year represents the lowest quarterly levels since the second quarter of 2007 when FDI was at 56 million Euros. The ongoing political crisis and its escalation during an anti-government protest in January 21, could have also influenced the FDI retraction.
Fears of another global financial disaster
A debt crisis in Europe’s single currency zone has entered a new and critical phase, with fears that Greece could default and spark a global financial disaster like that which followed the collapse of U.S. investment bank Lehman Brothers in 2008, Reuters reports. Euro zone finance ministers have told Greece it has to approve stricter austerity measures before a final decision is made on the next round of EU/IMF loans.
Ahead of a second day of meetings in Luxembourg on Monday, ministers indicated that the 12 billion Euros in aid would be paid by mid-July– allowing Athens to avoid default, but said the country had to show progress on plans to cut spending, raise taxes and generate other revenue streams first.
Greece has a debt of 340 billion Euros ($481.5 billion), more than 30,000 Euros per person in a population of 11.3 million. The 110-billion-Euro bailout which was accepted last year from the European Union and International Monetary Fund has proved insufficient and a second package worth 120 billion Euros is now being considered. With its debt equivalent to 150 percent of annual output, Greece holds two unwanted world records: the lowest credit rating for a sovereign state, and the most expensive debt to insure. Its people have run out of patience with an ever-deepening austerity drive that has slashed public sector wages by a fifth and pensions by a tenth.
A default by Greece would devastate the banks that hold its debt, including the European Central Bank and large French and German lenders.
It could also prompt credit markets to freeze, as happened after Lehman’s collapse when banks virtually stopped lending to each other. A Greek default would be a catastrophe and a humiliation for the European Union, which launched the Euro in 1999 as its most ambitious project and a symbol of the continent’s unity. It has prompted some commentators to think the unthinkable: that the euro zone might break up, either by the expulsion of Greece or the departure of Germany, the EU’s paymaster, which might be tempted to return to its own currency.
Greece, whose economy had grown strongly but suffered problems with corruption and bureaucracy, joined the Euro zone a decade ago.
It went into recession in 2009 after 15 years of growth and its budget deficit hit 15.4 percent of GDP after a series of revisions by the government which revealed the country’s economy was in far worse shape than it had previously admitted.
