(Repeats story filed late on Friday. Text unchanged)
* Greek crisis could stifle recovery in southeast Europe
* Romania, Bulgaria, Serbia exposed to Greek lending squeeze
* Already weak FDI levels expected to suffer
By Sam Cage and Radu Marinas
BUCHAREST, March 12 (Reuters) - The Greek debt crisis is
poised to undermine already dwindling investment flows into
south-eastern Europe's emerging economies, adding to barriers to
recovery in one of the continent's most fragile regions.
Greek lending in central and eastern Europe is concentrated
mainly in Romania and Bulgaria, both struggling to recover from
sharp economic contractions and most exposed to any scaling back
in funding as Greece's banks shore up their own finances.
Greece has been a major investor in the region -- it is the
second biggest in Serbia -- since the fall of communism in 1989.
Its problems have so far had only a limited impact on nearby
states and it is unclear how much of a drag it may create.
But the European Bank for Reconstruction and Development
warned last week of potential hits to bank systems and economies
and analysts have also raised concerns. []
Greek firms are also not expected to invest heavily in their
usual target areas as they digest severe government cost cuts at
home, while simple proximity to a country that has become the
latest trouble spot on investors' radar may also be an issue.
"I think there's a very real risk, actually," said Capital
Economics analyst Neil Shearing. "You may not get wholesale
retreats from Romania and Bulgaria but you're not going to get
an increase in flows, certainly."
By comparison, Greek banks and firms have little major
activity in the European Union's emerging states further north
and West like Poland, Hungary and the Czech Republic.
LENDERS ACHING
A 50-plus-percent spike in bank loan growth helped Romania's
economy double in size from 2004 to 2008 and a similar trend
gave Bulgaria a big boost, but that rate of expansion has fallen
to near zero in both states and is not expected to return soon.
Mired in recession, they need foreign investment to
kick-start recovery. But, since a string of downgrades to
Greece's credit rating by rating agencies, banks are not likely
to expand their loan books abroad this year.
Greek banks make up four of Bulgaria's top 10 and three of
Serbia's. Two of Romania's top 10 are Greek and they account for
15 percent of banking assets. For Bulgaria, it is 30 percent,
and its central bank governor has moved to quash government
concerns about a possible liquidity drain. []
In Serbia, Greek banks control more than 15 percent of
assets, and even though the central bank says Athens' woes are
not a problem, banking sources say officials are keeping a close
eye on Greek lenders. [].
"We could see some more cautiousness when it comes to
extending credit action, which already is at a very low level,"
said BNP Paribas FX strategist Bartosz Pawlowski.
"It will be something that will delay credit growth which in
turn will delay economic recovery."
Greece's troubles are too recent to show up in actual data,
analysts say, and some Austrian banks like Erste <ERST.VI> have
suggested they could plug any gaps left by loan declines by
Greek or other lenders that have been hit by the crisis.
But last year's data showed a push by Erste for more market
share in Romania, where it is by far the biggest foreign-owned
lender, raised its loan levels only marginally, to 11.2 billion
euros, from 10.9 billion a year earlier.
The uncertainty is shown in analyst ratings on Greek banks
-- Goldman Sachs has "sell" recommendations on Bank of Piraeus
<BOPr.AT> and National Bank of Greece <NBGr.AT>. Other Greek
operators in southeast Europe include Alpha Bank <ACBr.AT>, EFG
Eurobank <EFGr.AT> and Emporiki <CBGr.AT>.
FDI STIFLED
Another problem is foreign investment in general. In
Romania, it almost halved to 4.9 billion euros in 2009, from 9.5
billion a year earlier. Greece ranked sixth in FDI at the end of
2008, with a share of 6.5 percent.
Investment from Greece to Bulgaria also plummeted last year
to just 48.5 million euros in 2009, or around 2 percent of FDI,
from around 7 percent, or 400 million a year earlier.
In Serbia, FDI fell 60-70 percent last year to 1.5 billion
euros, and while Greece's part was roughly flat at 46 million
euros, it was well below the pre-crisis 336 million euros seen
in 2007, central bank data showed.
On top of the region's own troubles -- which forced
Bucharest and Belgrade to grab International Monetary Fund-led
rescue loans to avoid worst crises last year -- another thing
that is not likely to boost confidence is their simple proximity
to a country investors now treat with more caution.
"The Greek troubles and the Romanian situation send worrying
signals. This all affects investor mood and the ability of the
country to attract fresh capital," said Kiril Avramov, of the
Political Capital think tank in Sofia.
Romania's economy is expected to grow by around 1.3 percent
in 2010. Bulgaria's is still on shaky ground, with economists
and the government seeing GDP growth at just 0.2-0.3 percent.
Capital Economics is more pessimistic, seeing Romania's GDP
staying flat this year and Bulgaria's economy shrinking a
further 1.5 percent.
That means investors looking to tap emerging Europe's
recovery may shift money to more stable countries like Poland,
the only European Union state to avoid recession last year, or
those with limited Greek exposure including the Czech Republic.
"Obviously more central European countries are less exposed
to the Greek problems, as the impact is only indirect," said
Miroslav Plojhar, an analyst at JP Morgan.
"From this point of view, all other countries are much safer
than Romania and Bulgaria."
(Additional reporting by Anna Mudeva and Tsvetelia Tsolova in
Sofia; editing by Michael Winfrey)
