How Greece Found a BFF in Bulgaria
WHY YOU SHOULD CARE
Because if Greece falls, Europe falls with it.
They say you know who your friends are in times of struggle. So Greece must be feeling pretty lonely these days: Since the country went bankrupt seven years ago, the rest of Europe has been trying to distance itself. Besides a handful of sunburned British tourists, everybody is pretending the country doesn’t exist. Everyone except Bulgaria.
Don’t get us wrong — the little nation is no Balkan Good Samaritan. Rather, Greece’s demise has actually spelled fortune for its neighbor.
Since 2009, about 10,000 Greek companies have moved into the land of food you’ve never heard of, according to the Hellenic Business Council in Bulgaria (HBCB). And these migrants sell more than gyros and yogurt. Large Greek businesses in sectors such as retail, metallurgy, fuel distribution, construction and real estate are all flocking to this new promised land. Bulgaria is giving Greece “an opportunity to survive as the export-oriented economy they are,” says Roumen Galabinov, a Bulgarian investment banker and head of the country’s National Program for Catastrophe Risk Management.
It’s no surprise that supermarkets in Sofia are packed with products with cryptic Greek labels, or that there are more Dimitris and Vasilis running companies in Bulgaria’s south.
If you’re desperate enough, the incentives are bountiful. While the Bulgarian market — around 7 million people, less than the population of New York City — may not seem glamorous to the large, fast-paced economies of Germany or France, for the struggling Greeks, Bulgaria borders on godsend. Corporate taxes and labor costs are both very low, and, despite the high rates of corruption, Bulgarian banks are pretty trustworthy — with surprisingly high liquidity and capital controls, garnering praise from the International Monetary Fund.
Besides the friendly economic environment and the reliability of Bulgaria’s bank system (something that Greece can only dream of), Bulgaria has the obvious advantage of being next door. The prospects for a Greek business owner to knock at the icy doors of German markets or try to set up camp in depressingly gray Bristol, in England, may be daunting, but heading to Bulgaria is like taking a drive to Grandma’s house — if a visit to Grandma spelled bailout. According to the HBCB, about 4,000 Greek companies have moved to Bulgaria’s southern regions of Sandanski and Petrich alone, 70 percent of them from northern Greece.
“It’s a win-win situation,” says Galabinov, who adds that Bulgaria needs the talent and Greeks need the market. So it’s no surprise that supermarkets in Sofia are packed with products with cryptic Greek labels, or that there are more Dimitris and Vasilis running companies in Bulgaria’s south. There are multinational, multimillion-dollar construction companies like Aktor, which is based in Greece and operates in 12 different countries, or Chipita, which exports snacks and chocolate confectioneries that are increasingly present in Bulgarian supermarkets. The migration is also evident when you consider the culinary scene of Bulgaria. Greek-owned fast-food shops have been popping up right and left in Sofia, selling their yummy gyros. There is also a growing number of Greek delis promoting the Mediterranean diet by selling Greek products like olive oil, yogurt and halloumi.
Granted, this is not a completely new trend. As neighbors, these two countries have long had strong economic ties. A few events have vaulted this relationship to new heights. There is, of course, the financial crisis. While Greece used to be Bulgaria’s rich cousin, Bulgaria is now the one offering a helping hand. The growing political and economic instability of Greece’s other possible regional partner, Turkey, has played a part, too — the Turkish economy has gone from flying to flagging in the last couple of years.
And it’s not only Greek companies benefiting from the move. The Bulgarian economy has been stagnant for decades — growing at about 1 percent, with a 12 percent unemployment rate. The mass migration of young, qualified Bulgarians seeking jobs abroad has left the country with a significant brain drain, one that the Greeks are more than able (and happy) to fill. So, while overqualified Bulgarians leave to work in construction or service industries in Spain, Greeks are taking over vacant managerial positions in sectors from fast food to cement.
There are downsides to the trend as well. Economic migration risks leaving Greece with a shortage of high-skilled workers if and when its economy recovers. All the capital that has been moved to Bulgaria isn’t likely to return anytime soon. And neither are the Dimitris and Vasilis who have found a new home for their families on the other side of the border. And if that happens, Bulgarians working abroad may have a harder time coming back, says Krassen Stanchev, an associate professor at Sofia University and chairman of the board of the Institute for Market Economics. This could be a problem since return migration is increasing: According to the national census, 73 percent of all Bulgarians who emigrated in the period 2001 to 2011 and resided abroad returned home in less than five years.
Still, these consequences are likely a long way away, says Nicholas Economides, professor of economics at NYU and UC Berkeley. He believes Greece still has five to 10 years before it can “convince the world that it is at a stage of recovery.” Meanwhile, having a market for their products is helping them cushion the blow dealt by the economic crisis while fueling Bulgaria’s sputtering economic growth.
Maybe there is a happy ending to this Greek tragedy after all.