Bulgaria is potentially exposed to a Grexit contagion more than its neighbors in Southeast Europe, a Morgan Stanley report argues.

“While the direct economic impact of a Grexit looks manageable, we think that the banks are by far the most serious potential channel of contagion,” Morgan Stanley Research analysts are quoted as saying, in a Bloomberg article authored by Slav Okov.

Bulgaria in particular is at risk, with its exports to Greece amounting to 3.8% of its GDP.

With 14% of Greek banks' business on southeastern European markets and a market share of 25 percent, these financial institutions hold key positions in the region, with Greek lenders consituting a substantial part of foreign claims in Bulgaria, Romania and Serbia (33%, 18% and 23%, respectively).

With talks underway between Greece and Eurozone finance ministers, Morgan Stanley seems to be looking into scenarios that could be triggered if Greece abandons the euro.

“In case of a liquidity shortage, Greek subsidiaries in Bulgaria, Romania and Serbia would probably create the need for local authorities to step in,” according to the report. Analysts observe "the potential for large deposit outflows" as a key challenge these southeastern European nations could be facing.  

Experts are quoted by Bloomberg as sharing diverging opinions as to whether a Grexit would have consequences on the Bulgarian bankins system.

Read the full article here.

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