This is the worrying title of an outlook document for 2012 that we have received from Business New Europe recently. It begins with:
"The big question for investors in Southeast Europe in 2012 is the same as that for anyone invested in the wider region: what will be the fallout from the mess in the Eurozone? There is only one country in Southeast Europe that is actually a member of the Eurozone – Slovenia. But with strong trade, funding, investment and banking ties, every in the country in the region will feel the pinch as Western Europe's economies, particularly those of Greece, Germany and Italy, continue to struggle."
"There is a high but uneven degree of economic dependency between [Emerging] Europe and the Eurozone in general and Germany in particular. There are four main transmission mechanisms between East and West:
(i) trade, (ii) investments, (iii) credits, and (iv) sentiment," says Marcus Svedberg, economist for the CEE-focused fund manager East Capital.
This comprehensive document, that forecasts the development in each country in SEE, can be accessed here by our members.
As an extra bonus our members can access a bne-forecast for Central Europe titled "Blissful living in Central Europe". It starts: "Ignorance is bliss, so they say. That should make Central Europe the happiest place on the planet in 2012, because as governments, analysts and the wider population try to gauge the depth and impact of the building crisis in the Eurozone, it's clear that no-one knows anything. Apart from the Hungarians of course, who know that everyone's out to get them". Members can access it here.
...and UniCredit Bank sees first half of 2012 as a testing period for whole CEE.
In this 62 page forecast from UniCredit Bank covering 17 countries, which can be downloaded freely here, the Bank begins with saying that the start of 2012 will be a particularly testing period for the CEE region. The primary uncertainty at this stage stems from EMU via a number of channels. Weaker growth in EMU translates into weaker external demand for CEE exports. CEE economies on the whole, however, are in a more comfortable fiscal position than EMU economies.
An increase in sovereign funding costs has more limited implications than in EMU. We see Hungary, Croatia and Slovenia as the weak links, with forced fiscal consolidation to contribution to a contraction in economic activity next year.