The Greek economic crisis has impacted the Albanian economy on a number of fronts—from plummeting remittances to lower foreign direct investments—but the fallout has also affected the social sphere.Albania and Greece have a long history of mutual political resentments – stemming from persistent territorial disputes since the 1900s, trampled ethnic minority rights, lingering declarations of war, and outright acts of mass internal violence. But at this moment, economic forces, instead of nationalist or ethnic tensions, may define the arduous relationship between the two nations. As Greece stands off against Europe for a shot at debt relief and an escape from more crippling austerity policies, its economic fragility is infecting neighboring Albania in ways that remain underexplored and absent from current discussions on regional risks. Even if not to stand in solidarity with its Balkan neighbor, Albanian officials and citizens could stand to be a little more concerned about Greece’s potential default on its IMF loans and abandonment of the Eurozone – if only for their own sakes.
Discounting Labor and Remittances
Understandably, most analysts and Balkan citizens are basing their risk calculations primarily on Greece’s liquidity-starved banks that are still struggling after a national referendum rejection of international bailout plans. But such a focus discounts other sources of economic dependence. In the case of Albania, it is labor that suffers the most from Greece’s economic tragedies. The country and its people rely heavily on remittances from immigrants across Europe, most of them concentrated in Greece and Italy. About 600,000 Albanians fled to Greece for economic opportunities since the 1990s, but due to the worsening of the debt crisis, over 180,000 of these mainly illegal immigrants have recently returned to Albania. In fact, in 2007, remittances from these immigrants totaled to 951.7 million Euros, or 14 percent of Albania’s gross domestic product (GDP), before plummeting to $543.7 million last year, or 5.4% of GDP. Remittance income has proven vital to Albania’s economic progression and well-being as it helps support basic family expenses, bolsters entrepreneurial activity, and upholds business growth and transactions.
Thus, sudden declines in such labor opportunities and income generation have dire human costs. As remittances plummet due to the worsening Greek debt crisis, families across Albania, typically consisting of elderly parents or a mother and her young children, abruptly lose their chief source of livelihood. Particularly this week, as Greek banks imposed capital controls on currency, many Greek employers refused to pay Albanian immigrants their earned wages, often threatening to expose their illegal status if the employees protested further. As immigrant sons, fathers, and even daughters continue to lose their jobs in Greece or are suddenly denied their rightful wages and sent home, their dependents in Albania are unable to pay their daily expenses, forcing 86 year old retired fathers to take up the role of family breadwinner. It also means that Albanian shop-owners must worry about a swift rise in debt claims even for grocery purchases.
At the macro-level, a mass return of unemployed migrants to Albania would hike up the unemployment rate that stands currently at 17 percent. In the long term, the already struggling Albanian welfare system may also come under strain in its attempts to provide services (such as social security) for many new economically deprived citizens. The influx of Albanians leaving Greece would also put pressure on the Albanian public services sector. This is especially relevant for the health and education sectors, which cannot be sustained by higher public investment, as Albania is already lowering public spending in an attempt to stabilize their public debt.
Macro analysis also concludes that the Greek crisis has resulted in lower than normal foreign direct investment (FDI) to Albania – dropping from 53% of total FDI in 2006 to 27% in 2011 – a trend that is expected to worsen given current conditions in Greece. These figures become a bit more alarming once recalling that FDI in Albania is a key driver of national employment, business creation, and general economic growth.
In addition, although trade between Albania and Greece has drastically declined over the years, Albania would still see a decrease in exports and an intensified balance of trade problem if Greece were to leave the Eurozone. The new depreciated Greek currency would make Albanian products more expensive in Greek markets. Such macro-level trends further point to the economic importance of stabilizing remittance income from Greece, given that the Albanian economy has already lost out on several key macro indicators and may see further reductions pending Greece’s economic decisions. Ultimately, Albania is one of the poorest countries in Europe, with 14.3% of the population living under the poverty line. A dramatic loss in remittance income for already struggling dependent families, especially in small, rural villages, should not be dismissed in risk calculations – but it seems to be.
Few Banking Risks
Protecting banks across the Balkans is now the priority, and so, all other concerns appear to be pushed to the periphery. Serving as precautionary measures against spillover, central banks in Macedonia and Serbia recently introduced extra restrictions on the movement of capital between local subsidiaries and their Greek parents. Many other Balkan nations have quarantined the capital of the local subsidiary branches from the main Greek lenders, shutting off any outflow of capital, so as to prevent economic instability from spreading. Still, worries abound amidst Balkan citizenry that they will awaken one morning without access to their bank deposits, as in the case of Greece.
But as the chief of the IMF in Albania recently stated, Albania’s banking sector remains insulated from Greece’s calamities. Nadeem IIhahi assures that Albania’s banks are well capitalized with a surplus of liquidity at about 17 %. Although many of these banks are Greek-owned, Gent Sejko, the head of Albania’s Central Bank, also agrees that outside of a “minor” remittance effect, Albania will suffer minimally from Greece’s financial instability. It is true that so far, Albania has experienced no banking anxieties and has little reason to worry in the future.
Yet these individuals greatly disregard remittance shocks by pointing to the already dramatic decline in remittance income in the last five years. What they forget, unfortunately, is that this time, the decline may come much more rapidly and will impact sectors of society that are already on the brink of economic collapse. What they discount is that with each lost job, unpaid wage, or declined cash withdrawal, Albanian families are also directly hurt by the Greek crisis, alongside the many more ailing Greeks. The banking sector is important, but it is not the only way that a country can suffer from economic disasters across the border.
Another enduring, but magnifying concern that Albanian officials may wish to discuss with their Greek counterparts amidst this economic tension is the rise of ultra-nationalistic movements in Greece. Albanian immigrants in Greece, who support the Albanian economy through their remittances, must now face destructive economic forces bolstered by xenophobic sentiments – making sudden firings and indefinite withholding of wages more likely. Labor discrimination has been ever present for Albanians in Greece. With regards to low-skilled labor, Albanians face 43.5% less chance of access to occupations, with wage contracts being less than 8.8% as compared to Greeks, and 5.3% below the minimum wage. These figures are only expected to rise in today’s restrictive economic atmosphere.
The gradual rise of Golden Dawn, the Greek neo-Nazi party, which came in third place in the last national election, is particularly worrisome for Albanians working in Greece and for the relationship between the two countries. This party’s platform is founded upon staunch hatred and resentment of immigrants, Muslims, and EU-level policies – often reflected in violent, sometimes fatal, outbursts. Economic instability only strengthens such resentments toward those who are ‘taking jobs away’. Moreover, any internal conflict between ethnic groups may easily diffuse into the relationship between Greece and Albania as a whole – a relationship that must already confront many unresolved issues.
Time to talk
With the planned visit of the Greek Foreign Minister, Niko Kotzias, to Albania this July, Albanian officials may soon have an opportunity to directly present some of these concerns to Greek counterparts. Already on the table for discussion are several hot-button issues: the disputed Maritime Pact of 2009, the still in-effect Greek declaration of war against Albania, the conditions of the Greek minority in Albania, and even the potential recognition of Kosovo’s independence. But the discussions should also include the mistreatment of Albanian immigrant minorities in the present-day and rising tides of ultra-nationalism and anti-immigrant sentiments across Greece.
Albanian workers in Greece not only support Albania’s national economy but also serve as social reflections of collective Greek treatment of minorities. While this might not be an optimal time for the Greek state to implement any solid initiatives toward these concerns (as it is facing more urgent matters), it is the proper time to at least bring them to the attention of the nation and the Balkan community before economic deprivation makes matters worse – as it always tends to. Perhaps in the future, the Albanian state will become more sensitive to economic ripples from neighboring Greece, especially in the case of immigrant labor, and negotiate more legal and social protection for this vital group in times of crisis.
Sidita Kushi is a PhD candidate and instructor in Political Science at Northeastern University. Her research centers on the interplay between human security and economic forces in Eastern Europe and the Balkans. In addition to Balkanist, she has published in E-International Relations, openDemocracy, New Eastern Europe, and more. Follow her on Twitter @SiditaKushi.
Odeta Kushi is an economist currently working in Washington D.C, with research interests in the Balkans, especially as pertaining to privatization and foreign investment. She has previously published on Kosovo’s untapped economic resources and Albania’s political boundaries. Follow her on Twitter @OdetaKushi.