By Enfrid Islami
25 May 2012
The fragmentation of voters support in the latest general elections in Greece prevented any party for obtaining the necessary majority needed to form a government, which could help the country move forward on its efforts to recover and abide to the austerity measures agreed to with the EU, in return for financial help. This means that the Greek financial chaos and its spillover effects will continue to threaten not only Greek people themselves, but many of its trade partners in the region. With more then 500,000 of its nationals currently residing in Greece, one of the countries who is going to be mostly affected is Albania. Consequences of the Greek hard financial times for Albania range from the drastic fall of remittances of Albanian immigrants headed towards the country, return of a considerate number of immigrants to Albania, the closing down of the several Greek companies currently operating in the country, dangers related to the private banking sector, and even the possibility of deprecation of Albanian’s assets in Greece if the old drachma is brought back. However, the aftershock of Greece’s financial earthquake in Albania will not only be felt on the economic level. While diplomatic relations between the two countries have been stalling for the last three years even without the crisis , a toughened attitude from the upcoming government towards Albanian immigrants in Greece may represent one more reason for this relationship to go awry . Keeping in mind that an unanimous decision is needed in the EU on whether Albania should obtain the candidacy status this autumn, diplomatic repercussions of the long lasting financial crisis in Athens may represent a definite deal breaker.
Riding a dangerous wave
The breaking into pieces of the political system in Athens, clearly does not help the implementation of reforms needed to overcome the financial turmoil. The latest trends show an increasing number of Albanians heading back towards their homeland in search for better opportunities and possibly a job.. However, the return of even the smallest fraction of the almost 500,000 Albanian immigrants would turn into a burden for the Albanian economy, because of the lack an efficient immigrant return strategy from the Albanian government, as well as the lack of functioning reintegrating mechanisms. With unemployment floating at almost double of what is officially declared ( government evaluates unemployment at about 15%), the prospect of having people coming back from Greece in search for a job would actually worsen the already chaotic job market in Albania. Some would also argue that immigrants who might come back may also introduce the market to new kinds of services, as well as a fresh inflow of capital, but the effects that the latter might have on the Albanian economy remain to be evaluated.
The drastic fall of remittances also needs to be taken into account while we analyze the effects that the crisis next door would have on the Albanian economy. As Andi Balla underlines in his article “Worrying about the Crisis next door”, “Migrant worker remittances have hit a new record low. Partial 2011 data indicate a dive of as high as 42 percent for the year’s first three quarters compared to the same period in 2010. By comparison, remittances dropped by 12 percent from 2009 to 2010. And the weight of remittances is huge in the Albanian economy. They accounted for 10.7 percent of the GDP in 2009 and 13.5 percent in 2007″
The current financial situation and the effect they are having on the Greek banking sector are easily transferable to Albania as well. With Greek banks, holding about 35% of the banking sector in the country, the possibility to see Greek Bank branches in Albania run into some sort of difficulties are anything but remote. In spite of the fact that national laws protect deposits in these branches, while at the same time prohibiting them to move these reserves out of the country. The reduced capital inflow from their mother Banks would make it harder for Albanians citizens and business to acquire loans from these smaller banks at home. These banks may also consider it appropriate to set back on financing until the situation in Greece is more stable, and until what might happen in the near future becomes a bit more clear. The set back would clearly be a disadvantage for the financing of private enterprises in Albania, thus slowing down economic development for the country in the short term future. As Shkelqim Cani says in one of his articles on the effect the crisis would have in the banking sector in Albania, 1″The first thing we will be able to notice is a period of step back from Greek banks( maybe even Italian) on crediting the economy, mostly because of their inability to attract funds from their parent banks in their respective countries”
Furthermore, there is the threat that many of the almost 270 Greek companies operating in Albania, accounting for 28% of the total foreign investments in the country, having to close doors and leave thousands of Albanians unemployed. And even if they do keep their doors open, they might still have to cut out their expenses and cutting down on wages and/or staff, is something which most companies going through hard times are inclined to do.
On the other hand there are some who also believe that the current situation in Athens may somewhat be at Albania’s best interests on areas such as tourism, with the hope that tourists giving up on the idea of visiting Greece, might choose to reroute towards the Albanian seaside instead.
However, experts seem to agree on the idea that on matters of financial interests, Albania has much more to lose then to gain when it comes to dealing with the Greek crisis. As Jens Bastion states, 2 “The political and central bank authorities in Tirana should not underestimate the twin Greek economic and sovereign debt crises. Their potential implications medium-term are considerable. Some spill over effects are already manifesting themselves in Albania. In a word, despite a remarkable economic success story during the past years, Albanian policy makers would make a grave mistake by judging that they are immune to developments in Greece.”
While trade with Greece accounts for more then 9% of total exports from Albania, it is only a matter of time until the aftershock of the financial earthquake in Athens, has an effect on the economic growth of the country. Unfortunately, recent data from Bank of Albania shows that has already started to happen.
Security concerns
When Antonios Samaras, leader of the ND party handed back the mandate to form a government to President Georgios Papoulias, upon the realization of being unable to succeed, it was clear to everyone that Greece had just blown its latest shot at overcoming the political deadlock. With the following two attempts by Alexis Tsipras of the left Syriza coalition (which obtained an unexpected 316,78% of the general votes), and by Evangelos Venizelos of PASOK (who came in third in the elections with an even more surprising 13,18% of the votes), also failing, President Papoulias had no other option but to set the date for new elections in the country. Meanwhile, a government led by interim Prime Minister Panajotis Pikramenos was appointed with the sole mission of taking the country to the new elections to be held on June 17th. Such a fallout for the big parties consequently resulted in small parties like the radical Golden Dawn being represented by 21 members in the next parliament. Among other elements of its platform, the Golden Dawn promises its supporters to fight for Northern Epirus, a term which refers to the historical region of Epirus which is part of modern Albania, also bearing the connotation of a political claim as it was once in 1914 declared an independent state by local Greeks. The rise in demands from the Greek government on the territory could trigger conflicts and clashes between Greek minorities and Albanians in the southern areas of the country.
The latest political development have mounted fears of the radicalization of Greece’s approach towards immigrants in the country. Analysts and politicians around Europe are suggesting that the combination of economic insecurity and political discontent that has followed the financial crisis in Greece, has proved to be a fertile land for an increase in extremism, which is even further proved by the rise of the Golden Dawn party in the latest elections. Despite the fact that the latest results from the general elections are a show of citizens resentment towards the two big parties for their involvement in the implementation of tough austerity measures, rather then clear support of the radical political parties, the concern over the effect that parties like the Golden Dawn might have on Greece’s attitude toward immigrants is real. A weaker Greek state would find it hard to be able to manage the rise of nationalism within its borders, and would eventually could turn into a menace for stability and peace in the region. As consequence, one the countries which would be affected more from this phenomenon would be neighboring Albania and possibly FYROM. For a long time Greece has been considered by the EU as playing an important actor in the overseeing of the integration process of the region. A weaker Greek state will in this perspective be more of a security consumer, rather than a security provider.
Foreign policy
The financial stability which Albania has surprisingly experienced since the start of the global economic crisis in 2008 might give the impression that the country, albeit with the necessary preparations, may be able to minimize the negative effects of the Greek crisis. The story of the diplomatic relationship between the two neighbors might not necessarily follow on the same tracks. Even without the crisis, diplomacy between the two countries has stalled for the past 4 years, with no high level official figures paying any visit to either capital. The rejection of the continental shelf agreement by the constitutional court of Albania was only the latest contribution to an already rigid situation.
The expected rise in support of the radical left(and not only) expected in the next elections in Greece, will also be an undermining factor in the relationship between the two countries. The relative surprising representation in parliament of the Golden Dawn party, which sees the war on immigrants as a crucial part of its electoral platform (as well as its commitment to free Northern Epirus), may represent a serious threat for the almost 500,000 Albanian immigrants in Greece,.
The uptight relationship between Greece and Albania may also constitute a threat to the relationship between Tirana and Brussels. With Albania hoping to receive the green light from Brussels on obtaining the candidate country status this fall, the prospect of the unanimous decision of the EU member appears less likely with an unhappy Greece. As such, the composition of the next government in Athens, and more importantly its planned attitude towards Albanian immigrants residing in Greece, may very well define not only internal political and social changes in Albania, but most likely they will also influence its foreign policy priorities.
Looking at the bigger picture it also interesting to note what repercussions the Greek crisis may have in the region’s aspirations to EU integration. While Brussels currently struggles to deal with it internal financial problems, with Spain, Italy, Portugal and Greece as its biggest challenges, European leaders might not feel so enthusiastic about enlargement any longer. The postponement of the process of integration for the region, would mean a slow down in the implementation of much needed reforms in these countries, as well as a possible dissolution of the internal political cohesion which was mainly a result of having EU integration as a common goal.
In this terms, the already fragile political situation in Albania may not be flexible enough to accept the postponement of the EU goal for an unspecified amount of time. EU integration is the carrot leading the Albanian political elite to overcome their party interests in the name of a well defined objective after the agreement between the two political parties last November. Ruling that out as a possibility in the relative short future as a result of EU’s skepticism over the ability of the region to provide for financial stability would be nothing short of a blow to the internal policy making process in Albania.
The author is a Researcher at the Albanian Institute for International Studies
