Bulgaria eyes Greek crisis warily

Bulgaria has been watching the crisis in neighbouring Greece - where capital controls have been in place since Monday - through wary eyes, with its PM noting that Sofia is in "no rush" to join the euro.

The central bank issued a statement saying that Greek banks’ branches - which account for less than one-fifth of the financial sector in Bulgaria - were companies established under Bulgarian law and that they cannot transfer money out of the country without central bank permission.

“The Bulgarian banking system, including the banks with Greek stock ownership, has no claims to Greek credit institutions and no investments in Greek government securities”, the statement said.

It said depositors in Greek banks in Bulgaria will continue to have unfettered access to their money because “any action on behalf of the Greek government and central bank to impose measures in the Greek financial system has no legal force in Bulgaria and can in no way affect the normal functioning and the stability of the banking system”.

Georgi Genov, a professor at the Sofia University of National and World Economy, told state TV: “The developments in Greece will not affect the Bulgarian economy and the incomes of the Bulgarian population.

Georgi Angelov, chief economist at the Open Society Foundation in Sofia, said Greek banks in Bulgaria have raised their capital adequacy ratios to 25-28 percent during the past five years of Greek debt crisis.

This is more than double the minimum that the Bulgarian bank law requires after the country suffered an economic crash in 1996-97 and was forced to introduce a currency board under International Monetary Fund advice.

Angelov pointed to the longterm effects of neighbouring a country whose economy is devastated.

“I have no concerns about any kind of contagion,” he said. “The problem is that for seven years now Greece is in permanent recession and stagnation and one can see no end to it.”

He said that due to the crisis Bulgaria has lost Greece as an important export market and leading foreign investor. Some 6 percent of Bulgarian exports were now going to Greece, which is twice less than before the crisis.

“We have already consumed the basic effects of the Greek crisis but it is not good to have a neighbour that will be plummeting for another decade,” he said.

'No reason to rush euro membership'

Angelov said that some 10,000 small Greek businesses have moved to Bulgaria since 2009 fleeing the crisis in their homeland and noted that this trend is set to continue.

Bulgaria's prime minister Boyko Borisov said Greece's situation - the country is holding a referendum on whether to accept creditors' reform demands - has already had a political price.

"While the euro zone countries do not discipline themselves, I see no reason to rush with the membership," Borisov said in a statement, reports Reuters.

"If we were in the eurozone, we would also have to give money to Greece - the poorer would give to the richer, I do not see a logic in that," said the centre-right leader, referring to the bailouts given to Greece by its eurozone partners.