Greek Crisis and Its Spillovers in Southeastern Europe

Abstract

In moments of recovery from recession of global financial turmoil, Balkan countries started to face a new risk. Greek debt crisis began in 2010 and is one of the deepest economic and financial crises in both the Greek and European Union history. It has already created spillover effects in the weak economies of Southeastern Europe. This is mainly due to the strong economic integration between them and Greece, primarily as a result of intensive trade relations and high flows of Greek direct investments to those countries. The purpose of this paper is to show how Romania, Serbia (and Montenegro), FYROM, Bulgaria, and Albania have been affected by the financial turbulence of Greece. The methodology of the paper is to conduct statistical analysis by using datasets on a series of macroeconomic fundamentals that were found to be severely hit by the crisis. The empirical research uses extensive annual data spanning from 1995 to 2014, in this manner, covering a significant part of the transition period of Balkan countries, the boom period in the region, as well as the time of manifestation of the Greek debt crisis and its impact on Southeastern Europe.