site.btaEconomist Georgi Angelov: Greek Crisis Unlikely to Spill Over into Neighbouring Countries

Economist Georgi Angelov: Greek Crisis Unlikely to Spill Over into Neighbouring Countries

Sofia, June 29 (Mara Bareva of BTA) - The Greek crisis is not
expected to spill over into neighbouring countries, nor are the
clients of Greek banks outside Greece likely to behave as they
do inside the country, Georgi Angelov, an economist with the
Open Society Institute-Sofia, said in a BTA interview on Monday.
 Angelov predicted that Greece's possible exit from the euro
area may even reassure investors.

GREECE IS RELUCTANT TO MAKE REFORMS

Greece's creditors, particularly the International Monetary
Fund, are willing to help, but this requires reforms to
stabilize the economy - which is exactly what the Greek
government refuses to do, Angelov said. Similar crises have
happened in many other countries, including Ireland, Portugal
and even Bulgaria, and they have signed aid agreements and
implemented reforms. This is necessary because creditors want to
 be sure that they can get their money back. Sadly, Greece is
reluctant to make reforms and any money flowing into the country
 just vanishes as if in a black hole, he said.

The main question over the short term is how the Greeks will
vote in the upcoming referendum, Angelov said. If the government
 makes the people vote against the proposals of European
politicians, Greece will have to leave the euro area. But the
Greek society may just as well give the ruling Syriza party a
slap on the face and vote in favour of their own European future
 instead, the analyst speculated.

He noted that without reforms, the Greek economy will be cut off
 from funding and the country will have no money to make even
the most urgent and basic payments, such as pensions and wages.
One possible scenario is for the Greek government to adopt a
national currency. Such a currency would be very weak and shaky
as Greece is a bankrupt nation without monetary reserves to back
 it up. This means that a new Greek currency would unleash
hyperinflation and an even more profound collapse in Bulgaria's
southern neighbour, he predicted.

EURO AREA MAY BECOME EVEN STRONGER

Asked how such a scenario might affect the euro area and the
single European currency, Angelov said that now the euro area is
 far stronger than it was five years ago when the possibility of
 a "Grexit" was first recognized. The euro area has since been
reformed, a bailout fund has been set up and new fiscal rules
have been created, which has led to much greater stability, he
said.

Greece is the only exception to all these changes and is failing
 to meet euro area standards. So, in a way, the country has
already been excluded from much of what has been going on in the
 euro area, Angelov said. According to him, it can be expected
that without Greece the euro area will become much stronger,
because the other members are willing to address their problems
and make reforms when necessary. It is even very likely that the
 Greek-induced shock will propel the euro area towards deeper
integration. Anyway, that was the effect of the previous Greek
crisis of 2010-2011, the economist recalled.

WILL BULGARIA BE AFFECTED?

If Greece leaves the euro area, the Balkans will suffer yet
another blow to their image, making them even less attractive to
 external investors, but it should be acknowledged that the
region has been in this situation for five or six years now, he
said. Since the global crisis started in 2009, foreign
investment in the region, including Bulgaria, has dropped
dramatically. So a possible Grexit may put an end to the
uncertainty and reassure investors, who will say to themselves:
yes, Greece is not doing well, but at least we now know what is
going on, Angelov argued.

Commenting on the possibility of the Greek crisis spoiling
Bulgarians' holiday plans for the Aegean country, Angelov said
the Greeks are very pragmatic about tourism and their
restrictions on cash withdrawals via ATMs do not apply to
foreign tourists. Beginning on Tuesday, foreigners should be
able to use payment cards in Greece, so the situation will be
normal and foreigners will be able to continue their holidays
undisturbed, he said.

Overall, the Greek bank holiday will have an adverse impact on
Bulgaria's trade with its neighbour, because payments are
restricted, at least for now. It should be noted, however, that
much of the trade between the two countries is actually
conducted between Greek companies in Greece and Greek companies
in Bulgaria, which is why it is very difficult to predict what
part of the trade will suffer, the expert said.

Nor is it likely that the import of fruit and vegetables from
Greece to Bulgaria will be interrupted; in fact, it may even
increase as the Greek currency depreciates quickly after a
possible exit from the euro area, Angelov said. If Greece
abandons the euro and adopts a national currency, Greek products
 may become cheaper and imports from Greece to Bulgaria may
rise. This may happen unless Greece leaves the EU as well and
additional restrictions become necessary. Angelov does not rule
out a Greek exit from the EU.

TRAVELLERS SHOULD BE CAUTIOUS

He advised Bulgarians travelling to Greece this summer to watch
the political situation in Greece and bring some cash with them,
 just in case. Asked whether a bankruptcy of Greece may affect
the financial systems of its neighbours, Angelov was positive
that the current restrictions apply only to banks in Greece, not
 to Greek-owned banks in other countries.

People in Greece have withdrawn over 5 billion euro from banks
during the last seven months, which is a big run, but no such
thing has been observed outside Greece, not even at banks with
Greek shareholders behind them. This is expected to stay that
way in the future, and this kind of conduct on the part of bank
depositors will not likely spread into neighbouring countries,
Angelov said.