TIRANA, June 4 – The Albanian government is closely watching developments in Greece as the option of the neighbouring country leaving the Eurozone is seriously being considered.
As Albania’s second top trade partner, top foreign investor and the major source of remittances from an estimated more than 500,000 Albanian migrants, the impacts of the Greek crisis have considerably affected Albania in the past four years. Albania has had less trade exchanges with Greece, less remittances and foreign direct investment.
Local media say Finance Ministry and Bank of Albania representatives have increased contacts also with international financial institutions.
Fearing a collapse of the banking system in Greece, Albanian migrants in Greece are also transferring part of their savings home. According to Greek bank sources, 510 million euros have been transferred from Greek bank accounts to Albanian ones within the first three months of 2012. In 2011, Albanian migrant workers in Greece transferred 717 million euros to Albanian bank accounts. The money was transferred into closed bank accounts and had nothing to do with ordinary remittances, which sank to a five year low last year, according to Reuters.
Most international observers still think Greece’s Eurozone exit would be a crazy idea. Greece’s banking system would collapse, inflation would explode and contagion could even kill the entire euro edifice. But the number of those endorsing such a radical move seems to be growing, at least in Greece. Greeks head to the polls again later this month to cast votes for a new government that could ultimately decide whether Greece remains in the eurozone.
Robert Zoellick, the president of the World Bank Group says in a recent article, events in Greece could trigger financial fright in Spain, Italy, and across the eurozone, pushing Europe into a danger zone. “We cannot predict the outcome of the Greek election, nor whether a new Greek government will simply drive a harder bargain for more subsidies, rather than seek to leave the eurozone. If Greece leaves the eurozone, the contagion is impossible to predict, just as Lehman had unexpected consequences. A Greek exit would trigger a hit to confidence in other sovereign euro assets. Eurozone leaders need to be ready. There will not be time for meetings of finance ministers to discuss the outlook and debate the politics of incrementalism. In panicked markets, investors flee to safe assets, sparking other flames,” says Zoellick.
Impacts in Albania
With more than 600,000 immigrants, the Albanian community in Greece is the biggest migrant community there and accounts for 10 percent of the neighbouring country’s total workforce. However, since 2008 when Greece went into recession the migrant community there was the first to be affected as the construction and agriculture sector where most Albanian men work were severely affected. Reports show a considerable number of Albanian men are relying on their wives’ income who usually work as caretakers and risk renewing their staying permits because of being under no contract and not paying insurance.
Possible investments home seem risky in an already saturated market already suffering lower retail sales and domestic consumption due to crisis impacts and an acceleration in basic food products.
In late 2011, fearing possible spillover impacts from international financial crisis, Albania’s central bank proposed some legal changes that would protect branches of Greek foreign-owned banks in case their mother banks go bankrupt. The changes which were turned into law focus on converting bank branches into subsidiaries and the establishment of bridge banks as similar measures the European Union has adopted to prevent crisis effects. Central bank data show Alpha Bank Albania and the National Bank of Greece – Albania are the only two banks operating as branches in Albania with Greek capital. Tirana Bank is also a Greek capital bank while the Emporiki Bank majority stake is owned by French-based Credit Agricole Group.
A recent Bank of Albania report shows the market share of Greek banks operating in Albania shrank in 2011 with their credit share in 2011 dropping to 25 percent down from 30 percent at the end of 2010 and deposits to 17.9 percent of the total down from 19.3 percent at the end of 2010.
More Greek businesses in Albania
Reuters reports nearly 200 Greek-owned businesses registered in Albania in 2010-2011, a jump of nearly a third from the previous two years as Greek entrepreneurs abandon their shrinking home market with its uncertainty and high costs for lower taxes and cheaper labor in neighbors. “It is remarkable that even Greek businessmen who had never before thought of doing business in Albania express a certain interest these days,” said Spiros Economou of the Greek Embassy in Albania’s capital Tirana. Central bank data show Greece remains the key foreign investor in Albania despite being in recession since 2008. Greece’s total foreign investments at the end of 2010 were estimated at 724 million Euros, down from 771 million euros in 2007 before the neighbouring country plunged into recession. Greek businesses are present in almost every sector of the Albanian economy, including strategic ones such as telecommunications, the banking system, energy, industry, construction, trade and tourism, significantly contributing to the country’s economic growth.
