• Greek banks in the Balkans. Effects of the crisis and the internationalist deficit

  • Por Haris Golemis , Elena Papadopoulou | 22 Oct 09 | Posted under: Grecia
  • Introduction


    Since the demise of actually existing socialism in the ‘90’s, a process of reforms was put forward in the Balkan countries  with the aim of preparing these countries’ transition into capitalist economies which would eventually join the EU. This is already a reality for some of them (Bulgaria and Romania became full members in 2007) while others (like Croatia FYR of Macedonia and Serbia) are still in line for their acceptance. The discussion concerning the consequences of the last EU enlargement on the entrant countries (the development model which they were obliged to follow, the level of their economic dependence on western European capital and its political and social effects), on the neighboring older member states, like Greece, and the EU as a whole is ongoing. This discussion is even more relevant in the context of the present financial and economic crisis: Which are the reasons behind the increased presence of Greek banking capital in the Balkans? What is the situation regarding their Balkan subsidiaries? What are the effects of the crisis on the Balkan countries and the spillover effects on Greece? And last, but not least, are the Radical Left parties, the trade unions and the social movements of the “Old Europe” interested in cooperating with their “New Europe” counterparts and vice versa in order to resist the effects of the crisis?


    The interest of the Greek banking capital for the market of the Balkan countries 


    For Greece, the transition of its geographic neighbours into capitalist economies has been a very important development. The simplest indicator of this is the considerable penetration of the Greek capital in the region. It is estimated that around 8.000 Greek enterprises have invested considerable amounts in the Balkan countries, while around 20% of the annual turnover of many of them is realised there.  It is beyond the scope of this intervention to map the various ways in which the Greek capital in general has “invaded” the economies of these countries. Here, we are going to limit ourselves to the banking sector, not only for reasons of conciseness, but also because it is a modern and very profitable sector for the Greek economy, crucial for the development of the crisis in Greece and the other Balkan countries.

    In this intervention we have chosen to pay specific attention to those Balkan countries in which Greek banks hold important market shares and have many subsidiaries and employees, in other words to the countries where the banking capital [and the Greek capital in general] have been increasingly present mainly since the late 90’s. These are: Albania, Bulgaria, Romania, FYR of Macedonia and Serbia . The first question then is what made these countries so attractive to the Greek financial capital?


    Profitable opportunities for the Greek bankins capital in Balkan countries


    For the last 5-10 years, the annual GDP growth rate in the above mentioned Balkan countries has been considerably higher than that of the EU average [ranging from 5-10% since 2004 while the respective annual GDP growth of the EU-27 was ranging from 1-3%] (see Table 1 and Diagram 1). This means that the Balkan countries were found in a process of steadily being in the road of “catching- up” with Western Europe, while at the same time their banking sector was considerably underdeveloped. More importantly, low labour costs naturally attracted FDI and this was and still is the case for the Balkan banking sector. According to information coming from trade unions in Greece and these countries, the average salary in the banking sector of Albania is around €300 net, while in Bulgaria it is €500 net and in Serbia €520 net while in Greece it is around €1300 net.

    Table 1: Growth in real GDP in Balkan countries, EU-27 and the euro area
        1997    1998    1999    2000    2001    2002    2003    2004    2005    2006    2007    2008    2009
    Albania
        -10,9    8,6    13,2    6,5    7,1    4,2    5,8    5,7    5,7    5,5    6,2    6,9    1,2
    Bulgaria    -5,6    4,0    2,3    5,4    4,1    4,5    5,0    6,6    6,2    6,3    6,2    6,0    -3,0
    FYR Macedonia    1,4    3,4    4,3    4,5    -4,5    0,9    2,8    4,1    4,1    4,0    5,9    5,0    -1,3
    Romania    -6,1    -4,8    -1,1    2,1    5,7    5,1    5,2    8,5    4,2    7,9    6,0    7,1    -4,0
    Serbia     10,1    1,9    -18,0    5,2    5,1    4,5    2,4    9,3    6,3    5,5    6,9    5,4    -3,0
    EU-27 average            3.0    3.9    2.0    1.2    1.3    2.5    2.0    3.1    2.9    0.9    -4.0 (f)
    Euro area            2.9    3.9    1.9    0.9    0.8    2.1    1.7    2.9    2.7    0.7    -4.0 (f)
    Source: own elaboration of EBRD [economic statistics and forecasts] and Eurostat data
              
    For the Greek banking capital this economic environment constituted a unique opportunity to expand away from the maturity that the Greek banking market had reached, since potential [and in fact realised] profitability and the opportunity to gain significant market shares in the sector were high. This was facilitated by geographic proximity and mainly the cultural and historic ties which gave Greek banks a comparative advantage versus their Western European competitors. 

     During the last 15 years, Greek banks have established themselves deeply into the banking system of the Balkan countries. As we can see from Table 2, in 2007, seven (7) major Greek banks had established a network of around 19 subsidiaries in the Balkans, with around 1900 branches which employ around 23,500 people (excluding Turkey, which, if included, would take the respective numbers up to 2,400 branches and 40,000 employees) with the strategic goal of gradually increasing retail banking services [mainly consumer and housing loans and credit cards].


    Table 2: Network of Greek banks in Balkan countries
    Branches-Personnel
    31.12.2007
    Bank     Country    Subsidiary    Branches    Personnel
         1.       Bulgaria     United Bulgarian Bank AD    245    2886
         2.       Serbia     Vojvodjanska Banka S.A.     204    2556
    NATIONAL BANK OF GREECE    3.       Romania     Banka Romaneasca SA     125    1500
         4.       FYROM    Stopanska Banka AD-Skopje    61    1136
         TOTAL         635    8078
         1.       Romania    Banc Post S.A    239    3375
    EFG_EUROBANK ERGASIAS    2.       Bulgaria    Eurobank EFG Bulgaria AD (Bulgarian Postbank AD)    272    2645
         3.       Serbia    EurobankEFG Stedionica AD Beograd    100    1310
         TOTAL         611    7330
         1.       Albania      Emporiki Bank Albania SA    18    158
    EMPORIKI BANK    2.       Bulgaria     Emporiki Bank Bulgaria EAD     22    184
         3.       Romania     Emporiki Bank Romania SA     17    240
         TOTAL         57    582
         1.       Romania    Piraeus Bank Romania    110    1458
    PIRAEUS BANK    2.       Albania    Tirana Bank    39    448
         3.       Bulgaria    Piraeus Bank Bulgaria    76    962
         4.       Serbia    Piraeus Bank AD Beograd    45    532
         TOTAL         270    3400
    MARFIN EGNATIA    Romania    EGNATIA Bank (Romania)S.A    19    221
         1.       FYROM     Alpha Bank AD SKOPJE    15    189
    ALPHA BANK    2.       Romania    Alpha Bank Romania     125    1757
         3.       Serbia    Alpha Bank Srbija AD    130    1450
         TOTAL         289    3617
    ATE BANK    Romania     ΑΤΕ Βank Romania    16    261
    TOTAL            1897    23489
    Source: Association of Greek Banks

    In 2005, the participation of Greek banking capital in loan dispensations was 35.7% in Albania, 26.2% in Bulgaria, 37 % in FYROM, 13.6% in Romania and 17% in Serbia . The total loans of the 7 most important Greek banks to customers in the Balkans as of 31.12.08 amounted to €47.1bn, while total deposits were €25.8bn and total funding from the parent banks €21.8 bn.  

    Greek banks are not the only ones that made investments in the Balkans. The rapid privatization of the banking sector in these countries resulted to considerable market shares being controlled by other foreign banks as well. In Table 3 we can see the evolution of the market shares of foreign banking capital in Albania, Bulgaria, FYROM, Montenegro, Romania and Serbia since 1998. In 2007, foreign banks [mainly Austrian, French, Italian, German and Greek] owned 94.2 % of the banking sector in Albania, 82.3% in Bulgaria, 85.9% in FYROM, 78.7% in Montenegro, 87.3% in Romania and 75.5% in Serbia.


    Table 3: Asset shares of state and foreign owned banks in Balkan countries
        1998    1999    2000    2001    2002    2003    2004    2005    2006    2007
    Albania                                       
    State Owned (%)    85,6    81,1    64,8    59,2    54,1    51,9    6,7    7,7    0,0    0,0
    Foreign Owned (%)    14,4    18,9    35,2    40,8    45,9    47,1    93,3    92,3    90,5    94,2
    Bulgaria    56,4    50,5    19,8    19,9    14,1    2,5    2,3    1,7    1,8    2,1
        32,5    42,8    75,3    72,7    75,2    82,7    81,6    74,5    80,1    82,3
    FYROM    1,4    2,5    1,1    1,3    2,0    1,8    1,9    1,6    1,6    1,4
        11,4    11,5    53,4    51,1    44,0    47,0    47,3    51,3    53,2    85,9
    Romania    75,3    50,3    50,0    45,4    43,6    40,6    7,5    6,5    5,9    5,7
        15,1    43,6    46,7    51,4    52,9    54,8    58,5    59,2    87,9    87,3
    Serbia    90,0    89,0    90,9    68,0    35,6    34,1    23,4    23,9    14,9    15,8
        0,5    0,4    0,5    13,2    27,0    38,4    37,7    66,0    78,7    75,5
    Source: own elaboration of EBRD data [structural change indicators]
       

    Effects of the crisis on the economies of Balkan countries and spillover effects on Greece. 


    This has been more or less the situation in the Balkans before the economic crisis. High growth rates, rapid privatizations, penetration of foreign capital in the countries’ vital sectors (including the banking sector), demand-led growth based on national consumption (financed mostly by loans from foreign banks in foreign currency) and external demand.  The effects of the economic crisis, however, have already started to manifest themselves:

    a) As we can see in Graph 1, the 2009 forecasts of EBRD for the Balkan countries indicate a sharp decline in GDP growth. High growth levels during the previous years were largely based on consumer demand, fuelled by the parallel increase of lending provided by foreign banks. This means that the present liquidity shortage in Western European banks will primarily affect loan provisions for their subsidiaries in the Balkans. The example of Greece in this case is characteristic. When the Greek government offered a bail-out package of €28 billion to domestic financial institutions, the Governor of the Central Bank of Greece hurried to “advise” them to be “prudent” about extending funds to their Balkan subsidiaries.. The consequences of such a credit cut-off can be very damaging for the host countries as consumption and investment will further decline.

    b) Related to that is the expected decline of FDI which has been an important source of income for Balkan countries. The 2009 forecast in Graph 3 is indicative.

    c) Migrant remittances from Balkan nationals working in foreign countries used to be a very important factor for the health of the Balkan economies. During the last years, these transfers constituted an important share of the Balkan countries’ GDP, but today they consist one more factor that is expected to be influenced by the crisis. The reason is that these workers are employed in sectors of countries which are hit by the recession such as car manufacturing and construction industries or household services. What is more, many of them may be forced to return to their home countries putting additional pressure on the national labour market.

    d) An additional strain for the economies of the Balkans is the pressure to national currency. Some of them are already considering the dilemma of either devaluation or deflation, but it seems that the decision will be nothing more than the better of two evils. Currency devaluation will increase the difficulty of households and businesses to serve their loans taken in Euros or Swiss francs (with the argument of taking advantage of lower interest rates) and increase default.

    e) Export growth is also expected to decline as demand in the Balkan countries’ major importers (EU countries) is declining.  

    The effects of the crisis are all but a local phenomenon. The strategic decision of the Greek banking capital to expand in the Balkans now seems to turn in reverse:

    a) The potential turmoil described above is likely to have adverse spillover effects into the domestic markets of parent banks. The risk of default on loans that foreign banks have been extensively offering during the last period is present, even more so due to the devaluation of foreign currencies that increases households’ loans obligations. In the case of Greece, the evaluation of this potential default for Greek banks and for the Greek economy in general seems to be kept away from the general public. According to our information, even though Greek banks are over extended it seems that the situation is manageable, as shown by “stress tests” performed by the Central Bank of Greece and the IMF.

    b) The urge of the Governor of the Greek Central Bank to “spend local”-if taken literally- does not only affect households and businesses in the host countries but also Greek businesses in the region. Moreover, Greek banks are risking losing market shares and client confidence that –as Serbia’s minister of Finance recently warned  -may channel their deposits towards other foreign banks. 

    It is obvious that these questions do not only concern Greece. Austrian authorities, for example, seem to acknowledge the danger of a Balkan collapse more clearly, perhaps because this country has the biggest market share and a considerably large exposure in the Balkan countries’ banking sectors. Austria seems to be the country which mostly pressured the EU to intervene with a stimulus package in order to support the economies of South East Europe- a proposal which was not adopted. Under these circumstances, the questions which the developed Western European states, EU and other international organizations, as well as the dominant classes in Europe have to answer are: what is to be done in the Balkan countries in order to deal with the crisis? Is individual country reaction possible given the policy constrains due to high external debts? In an opposite case, what is the role of the EU in supporting the Balkan economies and what is actually the meaning of EU “solidarity”?

    In a period of crisis, there is no single truth in economics or politics. “TINA” is useful only in “normal times” and not in crises, recessions or depressions. Nowadays, many myths which used to constitute the mainstream “paradigm” are in the verge of collapse. Governments of EU member states react against fundamental rules of the EU or decisions of its authorities, granting, for example, state subsidies to national companies, using measures to protect their national economies from competition, closing down foreign subsidiaries etc. The EU as a whole is not so friendly to NMS (new member states) or FMS (future member states) and sends individual countries to the IMF or other international financial institutions,. But, even OMS (old member states) don’ t have any preferential EU treatment. For example, although a joint decision was taken by the ECOFIN to prevent banks from collapsing, each country was left alone to design and find measures towards this end.

    The IMF, the notorious role of which has been seriously questioned many times in the past due to its detrimental interventions during the East Asia or the Latin American crises (the case of Argentina for example), is very much present in the Balkans. It has signed an agreement with Serbia for a €3 billion loan, on the condition that the country limits substantially its public expenditures. Romania signed a similar agreement with various institutions which provided the country with a loan of €25 billion (€12.95 billion from the IMF, €5billion from the EU and €1billion from the World Bank ), while Bulgaria is considered as a potential candidate for a loan by the IMF even though the country’s finance minister publicly declared his disagreement. Albania seems to be presently in a better position due to its lose ties with the international economy. According to the Albanian Central Bank the banking sector is well capitalized and liquid, even though measures for containing deposits in the country (such as increasing the bank deposit insurance from €5400 to €25000) were taken. This was due to the fact that deposits in Albanian banks in February 2009 fell from €5.7 billion to €4.9 billion.     


    What is to be done? The role of the radical left political parties, trade-unions and social movements

    The financial and economic crisis brings to the fore crucial questions related to the ideology and politics of the Left: the role of the EU and of the national state, the issue of economic imperialism, the geopolitics of the crisis, the role of parties, trade unions and social movements, the preferential geographical level of workers’ and citizens’ struggles (nation state, Europe and other regions, world), the question of internationalist solidarity, the relative importance of resistances and programmatic proposals for the alleviation of the effects of the crisis etc.

    All of these questions and many more could be discussed using as case study the effects of the peaceful “invasion” of Greek banks in the Balkans, before and after the crisis. However, this is not of course possible within the time limits of this presentation. For this reason, we have chosen to deal in this paper only with one question which we consider crucial for the choices made by all Left political and social actors: Should these actors limit their actions only at the national level or should they also try to have a common or coordinated action on a European scale? Since this is a general question which covers a significant section of this workshop, in this paper we will simply refer only to our actual experience mainly from Greece (parties, trade unions of the financial sector, social movements) and some Balkan countries to the extent that we know them through our contacts.

    Most Left parties, trade unions and social movements in Greece concentrate their struggles, as well as their proposals for a progressive exit from the crisis at the national level. An interesting exception is SYRIZA (Coalition of the Radical Left), a political alliance in which SYNASPISMOS (Coalition of the Left, of the Movements and of Ecology) is the main component. During the European electoral campaign which was dominated by national issues, the party’ President and a team of academic economists dared to give a press conference where they presented a proposal for the abolition of the “stupid” (according to Romano Prodi), neoliberal Stability Pact, which imposes pro-cyclical fiscal policies in times of acute crisis. However, this very interesting “European” proposal was an exception to the rule which as we mentioned above contains political action only to the national level.  

    Regarding the banking sector, the actions (strikes, demonstrations etc.) of all Greek parties of the Left were oriented against the Greek government measures and the bankers. There was a general rejection of the pre-mentioned bail-out package, since left political forces believed that the Greek banks even if they are not responsible for the crisis, have made huge profits in the previous years. Instead they propose that the government should divert money directly to small and medium size companies (traditionally the Greek Communist Left considers the owners of these companies as allies of the working class) and increase wages and pensions in the public and private sector. Finally, there were proposals for a full or partial re-nationalisation of all the Greek banking system.

    The trade unions, despite their internal differences that follow the parties with which they are related, similarly oppose the government measures and have already staged some, more or less successful, industrial actions. One should note, however, that all actions from the part of the Left or trade unions have been unable to change government policies and that even in the European elections the divided Greek Left has seen its votes being much less than expected, both proportionally and in absolute figures.

    Regarding the initial question posed in this section, i.e. collaboration or at least actual solidarity between the Greek Radical Left, trade unions (especially of the banking sector with which we deal in this paper) and social movements in Greece and their counterparts in other Balkan countries are far from encouraging, especially during the present crisis. Each one for himself and his own (company, country), i.e. even worse than the national states and the dominant classes in Europe which despite their recent “egoism” have a minimum of common ideas on how to preserve the capitalist system. We can exclude from this picture, the usual expressions of solidarity to striking or laid off workers in some Balkan companies, which are generously given on paper, if asked, as well as the declarations of the European Left Party, the congregations of the European Social Forum or the action of some fringe antinationalist social movements, which however are not effective in changing policies either nationally or in Europe.

    If this happens in the over politicized, at least until recently, Greece, one can imagine how worse is the situation in most other Balkan countries, where the Left is either absent or marginalized and neither trade unions nor social movements are really present in their societies.

    Our example comes from the case of the banking sector. Until the late 80s, the Greek bank employees trade union movement used to be very active and efficient in its struggles, even in its mainstream facets (socialdemocratic or even conservative). Some people believe that this was the result of its corporatism, a claim which is not very far from the truth. However, this assertion ignores the Greek bank employees’ radicalism though the years, including a strike in the period of German occupation and a victorious fight for the preservation of their pension funds during the Colonels’ dictatorship.

    It is really remarkable that during the Balkan wars, OTOE (Federation of Greek Bank Employees) managed to bring in the same table representatives from all conflicting countries (Serbs, Croats, Macedonians, etc). This courageous and praiseworthy activity could not, of course, hide the very clear preferential relation of all Greek unions with their Serbian counterparts. Following the end of the wars, OTOE and its Labour Institute continued its relations with Balkan bank trade unions mainly through EU projects. In some cases this resulted to the transfer of important knowledge and know-how (production of collective agreements, bargaining techniques etc.). In some other, cooperation was mainly PR experience as well as an opportunity for nice holidays and shopping. 

    As time went by cooperation and solidarity between the Greek and Balkan trade unionists started to decay. A good example to prove this claim is the issue of the European Works Councils (EWCs). Greek trade unionists participated in EWCs of several multinational banks which had subsidiaries in Greece (one of the most active was the one of ABN-AMRO). But the reverse has not happened until now, despite the fact that some of the Greek banks with subsidiaries in Balkan countries conformed to the conditions of creating EWCs with member or observers coming from banks of countries that belong or don’t belong to the EU. This was not only due to the fact that the Greek bankers did not want to establish them despite their limited scope of activities, but also to the reluctance of Greek trade unionists to support their establishment, even they were asked to do so by their Balkan colleagues in the same bank. In a specific case, a trade unionist in a subsidiary of a Greek bank was vainly asking his counterparts in Greece to assist him in his efforts to establish a EWC in his bank. This demand was never satisfied. According to our information, the reason for this lack of solidarity was associated with the corporatist ties of the Greek Union with the bank’s administration aiming at preserving the pension status or higher wages for the Greek employees at the expense of establishing the EWC.

    Unfortunately, due to the time constraint, we cannot prescribe more extensively what is to be done. However, we believe that through the presentation of our case study and its title the hint is clear. We will try to make it clearer be reading you a part of a confidential e –mail sent by a trade unionist in a Balkan bank to the Greek trade unions: “….we believe that there should be no more delay (in our cooperation) because there are a lot of problems which should be addressed. If Greek banks me to the Balkan market, it was logical that Greek trade unions would follow, but that did not happen. There response to the globalization of capital should be the globalization of trade unions.” We believe that this appeal has a general application to parties, trade unions and social movements as the only way to be collectively more effective in our struggles and ultimately to re-found Europe. 


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