Euro Crisis in ‘Uncharted Territory’ Menaces Eastern States

http://www.bloomberg.com/news/2011-07-13/euro-crisis-in-uncharted-territory-menaces-eastern-states-berglof-says.html?cmpid=

Almost a third of Bulgaria’s banks and 12 percent of Romania’s are owned by Greek parents such as Piraeus Bank SA and Alpha Bank SA. Greek lenders own 15 percent to 25 percent of the banks in the non-EU states of Macedonia, Serbia and Albania.

While the largest western banks pledged to stay in eastern Europe at the height of the credit crunch, they reduced lending by 15 percent over the last two years, according to IMF data.

“Foreign banks have been quite restrictive with credit, and it’s only recently that they are restarting lending again,” Berglof said. “We are concerned that this will now contract again.”

The ultimate level of contagion would be if western banks had difficulty supporting their eastern units, he said.