ECONOMY

Payback time for Greek investment in Bulgaria, Romania

The time to reap benefits from their expansion into the Balkans is fast approaching for Greek banks. The accession of Bulgaria and Romania to the European Union in 2007 will accelerate growth, strengthen the current toward European entry in the region’s other states and raise the expectations for benefits from major Greek investments. In the two countries, Greek investments are estimated at 5 billion euros, and after accession the options for economic cooperation will increase further. In total, in the broader region of Southeastern Europe, investments by Greek interests now exceed 14 billion euros, about 6 percent of Greece’s gross domestic product. Greeks are now investing in the expanded region, marked by Ukraine and Poland in the north, the five neighboring countries in the Balkans and stretching eastward to Turkey and southward to Egypt. The European vision and the prospect of financial growth and welfare have led the region’s countries to adopt modernizing policies while putting an end to tensions and passions for national sovereignty which recently made the region suffer. Today the Balkan states compete in matters of attracting investors, privatizations, the creation of infrastructure, modernization of institutions and adjustment of legislation to the EU framework. As a result, Greece’s geographical position, a serious drawback until recently, is now a strong advantage. After years of isolation, Greek investors spotted the opportunities early enough and moved with alacrity, so their self-confidence has grown and they are now positioned to take on the role of a strong regional player. Banking, construction, trade, energy, food and several other sectors now no longer cater to a small market of 10 million people, but a new market of over 100 million people. Greek banks control 35 percent of the market in Bulgaria and 17 percent in Romania, while the major infrastructure projects scheduled for completion in both countries create considerable opportunities for Greek construction companies. The impressive – by Greek standards – increases in the country’s exports are mostly attributed to the growth of neighboring markets: In 2004 Greek exports increased by 13.5 percent, in 2005 they rose by 12.6 percent, and in this year’s first seven months they grew by 36 percent. Of course there is also the other side of the coin: Many local companies leave Greece in search of lower production costs. Furthermore, the rapid growth of neighboring states and their great flexibility render Greece’s efforts to attract foreign investment even harder. Ilias Milis, general director of the Piraeus banking group, told Kathimerini that «with the entry of the two new countries, the political stability of the broader Balkan region is strengthened and their economy’s credibility is consolidated, as is the stability of institutions on political and social level.» He suggested that EU membership will immediately secure Bulgaria and Romania considerably easier access to investment capital, not to mention the sizable funding from the bloc. «These parameters will accelerate growth and broaden prosperity in those countries,» he predicts. Milis argues that since 2000, when accession negotiations began, these two economies have grown by 4 to 6 percent annually and have shown swift progress in improving their social institutions. «Their accession will affect all Balkan states, as two of the main countries in the region along with Greece will belong to arguably the greatest economy in the world,» the executive noted. He further believes that Greece will now gain more efficient land transport connections with its new EU partners and safer terms of trade cooperation. «Greek businesspeople will be able develop their activities in these two countries more easily, within more stable institutional frameworks,» he told Kathimerini.