BANSKO, Bulgaria Once an idyllic hamlet of red-tiled roofs, this Bulgarian ski town is now crammed with empty new apartments, unfinished hotels and huge, idle cranes that mar the breathtaking view of the Pirin mountains.
Bulgaria's biggest winter resort thrived this decade in a property boom fuelled mainly by British and Irish investors, but that expansion has imploded as the global economic crisis puts a squeeze on credit and wipes out value in once lucrative deals.
Now the foreigners, no longer backed by soaring housing prices and cheap mortgages at home, are fleeing in a scenario playing out across other parts of ex-communist Europe, where heavy dependence on foreign cash and external deficits on trade and capital have raised the risk of crisis.
Real estate agencies say at least a third of Bansko's 2,200 foreign-owned holiday flats -- many bought over the internet without their owners having set foot here -- are on the block again, sometimes at half price.
"Many buyers who live in the UK and bought in Bulgaria are now trying to re-sell," said Christophe Gater of New Estate Consultancy in London, which specialises in Bulgaria.
"They cannot afford their costs back home."
Bulgarians themselves, the poorest European Union population per capita, are also struggling. Media say some Black Sea hotel owners have offered their debt-laden businesses for sale at a price tag of one euro -- grim news for tourism, Bulgaria's top foreign investment sector.
They are not alone. To the north the Baltic republics of Latvia, Lithuania and Estonia also saw a huge foreign-financed real estate explosion. The most widely quoted property prices there have dived 30 to 40 percent.
The housing collapse is the front end of what economists say could be a long, deep recession across the region that could spark a wave of bank and currency crises.
The International Monetary Fund and EU have already bailed out Hungary with a $25 billion (16 billion pound) deal announced last week after foreign investors dumped the forint currency due to fears over its heavy dependence on foreign borrowing.
Now economists say Bulgaria, its Balkan neighbour Romania, and Latvia, Lithuania and Estonia may need help.
"It's a matter of time before the IMF are called in," said Capital Economics EMEA economist Neil Shearing.
Analysts say Bulgaria will pay for not using its credit boom to boost productivity and encourage exports. Like elsewhere in eastern Europe, developers borrowed to build shopping malls, not factories, and consumers bought luxury cars and flat-screen TVs.
With foreign lending now drying up and some Western banks likely to cut loans to their Bulgarian units, economic growth in the country of 7.6 million will plunge to below 3 percent next year from the current 7 percent, analysts say.
Nowhere is this better illustrated than in Bankso.
The town has only two major manufacturing plants, providing some 500 jobs. But most of its 14,000 people spent this decade relying on the property boom, commerce and tourism.
"The property boom was a pure gift. It is not a real economy. It is necessary to work and produce," said Nikolay Proev who owns a small furniture-making company in Bansko. "This global crisis might play a major role in sobering people up."
Construction and real estate -- which along with related financial services draw most of Bulgaria's 6 billion euros in annual foreign investment -- were the first to feel the pinch.
Builders in Bansko and Black Sea resorts have cut staff due to low demand. In Bansko, property prices have dropped as much as 40 percent to 600-900 euros per square metre, agents said.
The London-based Black Sea Property Fund has abandoned a residential project in Sofia, and real estate agencies report a glut of unsold new properties in the capital.
"No-one is buying. Everything has frozen," said Asya Kavrakova of the British-owned Ski Property agency in Bansko.
Analysts say the worst is yet to come in the property sector and, with that, higher unemployment and possible bankruptcies.
"A resulting risk is that a wave of insolvency within the real estate sector and related businesses puts a strain on banking portfolios -- not much of this has been seen so far but the risks are there," said Gabor Ambrus of 4Cast.
Some analysts say the evaporation of credit and declining property market could push the country along the same path the Baltics have taken into outright recession.
Bulgaria's current account gap is over 20 percent, and a big private debt pile means it must continue luring foreign capital to keep the economy running. Whether it can will depend largely on the state of the global economy and whether Western banks can continue to invest.
Both Bulgaria and the Baltics have pegged their currencies to the euro, a move that helped protect them from hyperinflation but also fuelled the trend of consumers borrowing money in foreign currencies like dollars or the euro.
With inflation in double-digits again, economies and foreign lending slowing, concern about whether the countries will keep their pegs is rising. Devaluation is unlikely, not least because those same borrowers would then be hard pressed to pay back their boom-time debts. But it cannot be ruled out.
"The danger is that if we continue to see deterioration... in the G7, the financial crisis will hit the exposed economies in the Baltics and the Balkans very much through the banking sectors," said Ivailo Vesselinov of Dresdner Kleinwort.
"For now we don't factor a break of the currency board in our central scenario but the probability of this happening has significantly increased," Vesselinov said.
(Additional reporting by Irina Ivanova and Patrick Lannin; Editing by Michael Winfrey and Andy Bruce)