The war in Kosovo is impossible to escape.

Newspaper headlines trumpet the latest developments. The Internet percolates as chat rooms fill with heated debates on the conflict. Americans even eat their breakfasts while watching TV hosts broadcast from a Kosovar refugee camp.

While no figure is more important than the number of lives lost and people displaced, investment professionals and academics warn that the conflict also threatens what has been one of the great trades of the '90s: buying stocks and bonds in countries that aim to integrate with the

European Union


Although the war has yet to ruffle most world markets, it has already taken its toll on Greece, an E.U. member scheduled to adopt the pan-continental euro in 2001. While world stock markets continue to soar, the rally that sent Greece's

Athens Stock Exchange

33% higher this year has halted since the conflict started. The economies of Hungary, which aims to join the E.U. as early as 2003, and Croatia are also at risk.

To be sure, stock markets in Poland and the Czech Republic, both E.U. hopefuls, are up significantly in dollar terms since


planes began striking on March 24.

But analysts caution that the volatile situation, which could intensify if Russia enters the conflict, will take its toll on the region.

While Greece is a member of NATO, the Greek people sympathize, by and large, with the Orthodox Christian Serbs. The situation leaves the two leading political parties, both of which have pledged to get Greece into the euro, trapped between the proverbial rock and hard place. They risk angering NATO if they support the Serbs, yet could ruin their credibility with voters if they don't.

Partly to assuage public opposition, and partly out of sympathy for the Serb cause, Greek Prime Minister

Costas Simitis

, who heads the socialist


party, has made it clear he wants to see an end to the bombing. However, he has stopped short of the strident anti-NATO comments that have come from Russia so as not to jeopardize Greece's application to join the eurozone.

Some Greek experts think he can maintain this precarious balance. Even if the Pasok party suffers heavy losses at the June elections to the European Parliament, as many expect, they say that the conservative

New Democracy

party, if it won a possible general election later this year, would pursue the same foreign policy.

The E.U. has been doing its part to keep the Greeks happy. At the recent summit in Berlin, Greece got promised a greater-than-expected 25.5 billion euros in transfers from Brussels for the 2001-2006 period. "We expected at least 5 billion euros lower," says John Bunge, Greek equities specialist at

Auerbach Grayson


If, however, NATO calls on the Greeks to aid its efforts, possibly by using Greek ports for the offloading of ground troops, the situation could quickly come unglued. While some academics believe the Greek government would allow such a development, others question the limits of Athens' tolerance.

"Greece wouldn't be able to accept NATO troops going through its territory to attack the Serbs in Kosovo," says Michael Radu, a Balkans expert at the

Foreign Policy Research Institute


The Greek government could also turn anti-NATO if the allies press for an independent Kosovo, instead of the autonomy pursued at the Rambouillet talks just before the conflict, says Radu.

The Greeks fear an independent Kosovo dominated by Albanians could lead to the establishment of a greater Albania and the break-up of Macedonia.

One investor says he would run for the doors if Greece's Balkans policy endangered its relations with West.

"We like Greece because it's converging with the E.U. If that changes, we would definitely change our stance on the market," says Nigel Hart, a manager on the


Putnam Europe Growth fund, which holds shares in Greek telecom company




Foreign investment in Hungary, recently accepted into NATO, is also at risk.

The country could intervene to protect ethnic Hungarians in Vojvodina, a province of Serbia, if they were attacked by Serbs.

Throughout the breakup of Yugoslavia, armed conflict over the Vojvodina Hungarians has been avoided. According to Radu, the ethnic Hungarians have not made serious claims for secession and the region is prosperous. And Serbian leader

Slobodan Milosevic

perhaps realized the West would not tolerate a racial conflict in northern Yugoslavia, because of its closeness to western Europe.

The ethnic Hungarians, according to some press reports, have not been enthusiastic supporters of the NATO bombings. After all, much damage has been done to the bridges of Novi Sad, the capital of Vojvodina. But the ethnic Hungarians' strong underlying anti-Milosevic feelings could easily surface if the Yugoslav army continues to draft them to fight in Kosovo.

Croatia's tourism-dependent economy may already be reeling from the war, says Peter Botoucherov, analyst at

BancBoston Robertson Stephens

in London.

Tourists will likely avoid the country because of its proximity to the conflict, he argues. Croatia's tourism revenues, which account for a whopping 15% of gross domestic product, will be hit. As a result, Botoucherov is upping his current account deficit forecast to 6% of GDP from the preconflict 5.3%.