The Impact of Greek Crisis on the Western Balkan Countries

Abstract

Greece is experiencing one of the deepest economic and financial crises in history and its tremendous impact is not affecting only the Eurozone countries but also the economies of all South and Eastern European countries. The crisis is especially visible in countries influenced by the movements and deviations of Greek economy like the main regional trade partners or the ones that have a relatively high percentage of foreign direct investments. Among these countries the most affected are Albania, Macedonia, Montenegro, Bosnia and Herzegovina, Bulgaria and Croatia. The main aim of this research paper is to investigate and identify the impact and spillover effect of Greek crisis on the main Western Balkan countries. The chances of a rapid improvement of Greek economy seem to be diminishing and the tremendous impact on these countries are resulting in currency devaluation, increase of unemployment rate, decrease of real GDP and decrease of remittances. The purpose of this study is to analyze the effects of the crisis based on the main macroeconomic variables such as real GDP, inflation and unemployment rate. By using E-views program, a regression model will be built to help understand which of these macroeconomic variables was mostly affected and what will be the short term and long term effect of the crisis on the whole region.