New Dimensions of Country Risk in the Context of the Current Crisis: A Case Study for Romania and Greece

The attractiveness of a state regarding foreign investors, multinational banks and creditors, is closely related to country risk assessment. Most of the financial and economic rating agencies such as Standard & Poor's, Fitch, Moody's, etc., are in a position to analyze, more or less subjectively, more or less reliable, country risk developments. Rating systems that appear as important tools in decision-support are taken, in many cases non-critically, by the decision makers and used as such. The process of globalization has multiplied the country risk acceptance and successive crises with recurrence, often without advance, stressed that the assessment processes has significant shortcomings. Countries such as Greece and Romania, currently facing similar economic and social problems, are in a delicate situation. Although unlike Greece, Romania has not yet adopted the euro, a number of similarities between the two countries allow a simultaneous analysis. Recently, representatives of Standard and Poor’s announced that the declaration of support came from the European Union to Athens is a conducive factor for Greece, but this remains exposed to considerable risks; in December 2009, the Agency amend Greece in BBB + rating with negative outlook. For Romania, the passage of the attribute “negative” to “stable” is closely related to assessors of reforms agreed with IMF. Currently valued at BB +, Romania is below the recommended level for investment. In this context, the main aim of this article is to find the answer to a series of questions: Are these ratings really fair? What are the relevant variables in the analysis of states like Greece and Romania? What are the problem areas and how they can be treated? What country risk approach is appropriate for these countries?