Media sources: Ukraine’s collapse could destabilize the entire region

Newsroom 21/02/2014 | 09:06

The turmoil in Ukraine, where more than 100 dead had been reported by Thursday night and political violence seems to have no end in sight, is not affecting Romania economically right now outside of influencing the exchange rate (Romanian exports to this country only amount to EUR800 million a year), but there could be political and social ramifications. There are also fears about investment contagion and waves of refugees fleeing into neighboring states.

Ukraine, which is grappling with a record current-account deficit and foreign reserves at the lowest level since 2006, has $17 billion of liabilities coming due, excluding interest, through the end of 2015, data compiled by Bloomberg show.

Russia’s benchmark Micex Index lost 1.2 percent while the ruble fell 0.9 percent to 41.8124 against the central bank’s target basket of dollars and euros. The government’s 2028 bond yield increased 18 basis points to a record 8.62 percent. Currency in Romania (as well as Hungary, Turkey and Poland) weakened at least 0.5 percent against the euro on Thursday.

The forint led the decline, hitting two-year lows to the euro before unexpectedly strong demand at a Hungarian government bond auction dispelled fears of an immediate sell-off, writes MSN Money. But yields continued to rise at the auction, and a sell-off remains a risk if the Ukrainian crisis worsens or if wobbles in other emerging markets boost risk aversion.

“Ukraine is making the general bearish emerging-market sentiment even more poisonous,” said Adam Keszeg, analyst of Raiffeisen in Budapest. “Markets are thin, and even the moves of one big investor are enough to weaken them.”

President Traian Basescu said on Wednesday that Romania could receive 3.500 Ukrainian refugees.

“As far as Ukraine is concerned, I had a discussion about accommodation for refugees with the authorities, information services and the Ministry of External Affairs. Romania is ready to offer accomodation for 3,500 refugees in a initial phase”, the president commented.

According to the state leader, the Bucharest regime will agree with any individual sanctions offered to the perpetrators of excessive violence in the Kiev protests, but underlined that it is not the time to apply economic sanctions as “Ukraine is already suffering economically”.

“We are past the point of no return. (…) The security forces were provoked, but the answer was disproportionate. The 25 lives that were lost is an example of the fact that both sides have overstepped their bounds but the main responsability belongs to the state, which responded with disproportionate force given the challenges it faced”, the president declared, quoted by RFI.

Amid the negativity, Steven Van Groningen, vicechairman of the Council of Foreign Investors, believes this is a time to show that Romania is different.

“The crisis in Ukraine, as well as the situation in other countries around us, affects us in a certain way as constantly we have to explain why such things cannot happen in Romania.Even if I think that what is happening offers us the chance to show that we are different, the situation must be managed. We have to understand in what way a foreign investor looks from abroad to the region. And we have to manage this situation very well.”

Groningen also added that he doesn’t think at this point in time that the turmoil will directly affect the local market, according to MEDIAFAX.

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