ECONOMY

Balkans, the stage forGreek banks’ expansion

Greece is among the top countries investing in EU candidates Bulgaria and Romania, with Greek banks playing a leading role and contributing to their economic transformation, an Economist conference on the two neighboring countries in Athens heard yesterday. Bank of Greece Governor Nicholas Garganas noted that the Balkan subsidiaries of the five largest Greek banks now account for more than 6 percent of their total profitability. «Beyond the benefits to the banks themselves, their activities there have contributed to the development of the financial sectors of the reception countries,» Garganas said. He said further mergers among banks were forthcoming and necessary to make them stronger and more competitive. «The size of Greek banks is small compared to the size of the big banks of most members of the eurozone and their credit rating is, as a rule, lower. Therefore, the Greek banks that have international ambitions must increase their size,» Garganas said. He forecast further expansion into other Eastern European countries and the eastern Mediterranean but urged «careful steps.» Although the Greek banking system is currently healthy, Garganas warned that intensifying competition and rising interest rates were likely to increase risks. «In the medium term, as considerably large-sized loans granted recently mature, it is likely that repayment problems will emerge that were not adequately foreseen by banks, especially if the economic growth rate slows down,» Garganas said. Economy and Finance Minister Giorgos Alogoskoufis also urged banks to transcend their national character and become regional forces. He praised their expansion into the Balkans, where Greek investment has now reached about 5 billion euros. Bulgaria’s Finance Minister Plamen Oreshaski said his country’s economy has been growing at more than 5 percent annually and that unemployment has fallen to about 9.6 percent from 18 percent in 2001-2002. Romania’s Economy and Trade Minister Darius Mesca emphasized the role of direct private investment in his country’s economic development, having totaled about 15 billion euros between 1995 and 2003. «Prospects are very good,» he said. EFG Eurobank’s CEO Nikos Nanopoulos argued that the banking sector is spearheading European integration in the region. The markets of Bulgaria and Romania were described as key for Greek firms’ foreign investment but success is said to have been impeded by a number of factors, such as corruption, red tape and inadequate legal frameworks, said Dimitris Daskalopoulos, the chairman of the Federation of Greek Industries.