With problems in Greece set to rumble on for at least a number of weeks, the issue of contagion is of particular worry, especially in the region. 

Last week, Moody’s rating agency downgraded two of Bulgaria’s largest banks. DSK Bank was downgraded from Ba2 to Ba1 and Raiffeisen Bulgaria from Ba3 to Ba2.

The outlook was placed as ‘stable’ for both of them.

ECB/Government Funding

Bloomberg reported last week that in the event of contagion in the Bulgarian banking sector, the European Central Bank may intervene by offering funding where needed.

It was also reported last week that the Bulgarian government would offer support for Greek banks with Bulgarian subsidiaries.

Neither the ECB nor the Bulgarian Central Bank would comment on the issue last week when approached.

Business Interests

Bulgarian newspaper, Vesti reports that a third of shares in Bulgarian banks are owned by Greek banks.

In addition, many Greek citizens have business interests in Bulgaria. This is most acute near their shared border and in the country’s capital, Sofia.

There are already signs in Greek owned border factories in Bulgaria that owners are struggling to pay their workers.