“Under current conditions, Greece’s budget crisis poses a low risk of spillover into Romania in particular, compared to other regions. Greece’s crisis has already had a negative effect on the broader region of the European Union, as it weighed heavily on the euro and surfaced the flaws of a heterogeneous economic structure. If Romania lagged behind as other countries in the region emerge from recession, it would be due to its own mistakes”, said Victor Safta (photo), chief executive of X-Trade Brokers Romania, the biggest brokerage house in Central and Eastern Europe.
Greece had a budget gap of 13% in 2009, an unemployment rate of over 10% and is now dealing with social unrest. Greece’s crisis has spread across Europe, especially across the 16-nations eurozone, acting as the main driver of the euro’s sharp downfall.
The European currency fell steeply year to date against a basket of currencies in the world, hovering near 1.37 USD/EUR from 1.46-1.48 USD/EUR at the end of last year.
Furthermore, the Greece’s acute crisis sparked bitter disputes and controversies over a possible rescue package the European Union should or shouldn’t give.
The crisis in Greece escalated over the past few weeks, and some foreign analyst voiced concern that Romania could be ‘contaminated’ by it, due to the number of Greek-based banks running operations in the country. “The crisis ‘exploded’ over the past few weeks, but structural deficiencies date way back; if it had had certain influences over Romania, we would have seen them already”, X-Trade Brokers said.
“If these threats weren’t real, financial rating agencies wouldn’t have improved their outlook on Romania’s sovereign rating. Furthermore, the Greek banks’ exposure reduction to Romania could have been taken into account by the National Bank of Romania, and I doubt the NBR governor doesn’t have a ‘B’ plan. And let’s not forget the latest euro-denominated bonds issuing was deemed very attractive by investors”, Victor Safta pointed out.
Romania’s economic performance over the past few months has been chiefly poor, the only positive signal being the year-on-year increase in factory output in January by 6.8%. “Romania is facing its own problems, from budget deficit to unemployment and structural weak spots, and authorities should remain focused on these key issues”, X-Trade Brokers outlined.
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