The PIIGS piggy bank equals 35% of Romania"s banking system

The countries in the PIIGS group (Portugal, Ireland, Italy, Spain and Greece) control 35% of the Romanian banking system, according to calculations by our newspaper. Greek banks hold the largest share, (around 27% of the shareholder equity in the banking system, even though their share in terms of assets is smaller). Italy also has a significant weight, of around 6% in terms of shareholder equity, and Portugal holds around 2.7% of the total.

The other countries which are part of the so-called PIIGS group, Spain and Ireland are not present on the domestic banking market.

As such, holding around one third of the assets of the Romanian banking system, Greece and the other countries in the PIIGS group have become a risk factor which popped up on the radar of major international banks. However, the National Bank says that "the sky isn"t falling", since these banks can"t significantly affect the Romanian economy and its banking system.

"Even though banks from the so-called PIIGS countries control some domestic banks, the latter are essentially Romanian banks, whose managers are validated and supervised by the Romanian Central Bank", said Adrian Vasilescu, advisor to the governor of the Romanian Central Bank.

In turn, analyst Ilie Şerbănescu said that an exposure of one third of the foreign capital invested in the Romanian banking system amounts to around 12 billion Euros, which is something to consider, especially as there is a risk of this money leaving the country.

"Local banks, which are owned by banks in the PIIGS countries, have to do what their shareholders want. And if the latter decide that the money needs to return home, there won"t be much to do about it, except watch it happen", said Ilie Şerbănescu.

According to him, everything depends on the major Western banks, which have already ceased lending to banks in the PIIGS countries. "We are just spectators, Romania won"t be able to do anything but watch itself fall apart, if the European authorities so decide, even though I don"t think this will happen", said Ilie Şerbănescu.

Deutsche Bank analysts also see a possible reduction of the exposure PIIGS countries in Romania, even though the four largest Greek banks operating in Romania (Eurobank EFG, National Bank of Greece, Alpha Bank and Piraeus Bank) signed an agreement in Vienna to maintain their exposure to the Romanian financial system and to support their Romanian subsidiaries by boosting their share capital.

Alpha Bank was the only bank this year that increased its share capital by 70 million Euros in cash, to 235 million Euros.

According to the Bank for International Settlements, the European banking system has a debt exposure which exceeds 1,000 billion Euros in Portugal, Ireland, Spain and Greece. The country with the most exposure to debt in the PIIGS countries is Germany, (383.8 billion Euros), followed by France and Great Britain (282 billion and 256 billion Euros).

Last year, Greece had the largest budget deficit in the Eurozone, of 12.7% of the GDP, similar to that of Ireland. Spain"s budget deficit was 11.4% of the GDP, and Portugal"s was 9.3%. Also in 2009, the average budget deficit for the Eurozone was 6.4% of the GDP, and analysts expect it to increase to 6.9% this year.