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Bulgaria prays for salvation

Bulgaria has lower political risk than Romania. It has not had to turn to the IMF. But Greek banks’ market share in Bulgaria is 26%, twice as high as in Romania.

Greek banks’ consolidated claims amount to 36.7% of GDP in Bulgaria, according to London brokerage Exotix. They were also the most aggressive leading up to the crisis. Their average loan-to-deposit ratio is 200%.

After a 5% GDP contraction in 2009 and another slight fall in 2010, non-performing loans in Bulgaria are around 10%. A peg to the euro has allowed recklessness in euro lending, which makes up more than half of the total loan book.

Currency reserves are less than two-thirds of short-term debt, and the currency is overvalued. The peg might not be invincible, with potentially disastrous consequences for asset quality. 

See also:

Shaky state and troubled banks imperil Romania

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