Eurozone exit averted, but for Greek businesses, outlook is still bleak
The freezing of Greek banks may have avoided their collapse, but it has also kept local businesses from paying their bills. 'Right now we are at the mercy of our creditors' politeness,' says one entrepreneur.
Like many Greek businessmen, Stefanos Dimitroulakos has experienced first-hand the economic crises that have engulfed his country over the last six years.
And from his vantage point, as an export manager for the company his father set up in 1981, this year looks to be the worst yet.
“2012 was our worst year, but this has been even harder,” he says. The family-run business produces metal shelving for both the domestic and export market, with its main production center about 40 miles outside of Athens. “From the beginning of 2015 we have faced a lot of issues. The capital controls [limiting bank withdrawals to 60 euros ($66) a day and restricting the sending of money abroad] have been the most damaging,” he goes on. “Greek companies can’t import materials, and as a country we just don’t produce everything we need.”
Now, as Greece’s parliament on Wednesday night approved the latest set of tough austerity reforms demanded by the country’s international creditors, Greek businesses are counting the costs of the last months of political brinkmanship, and adding them to the hits already taken over the last six years.
“Greece has been a war zone these last few months, and the capital controls have created a very bad environment. Companies that deal solely with imports are in big trouble, and manufacturing is struggling,” says George Ioannou, a professor of economics at the University of Athens.
'Worse than World War II'
Around 300,000 businesses in Greece have closed since the beginning of the financial crisis in 2009. Many others may fall shortly. Parts of the economy have almost ground to a halt as people have been unable to withdraw money, or have tightened their belts and are bracing for difficult times ahead.
“The whole country has just stopped,” says one corporate lawyer. “I go to the office, but there is little work to do.”
The Greek economy is estimated to have lost a million jobs since 2009 – a fifth of the active workforce that was employed in 2008 – and this could grow in the near future as the effects of the last few months of brinkmanship become more apparent.
On Thursday, following the passing of the latest set of reforms demanded as part of the bailout terms, Greece’s most influential think tank, IOBE institute, predicted that the economy could contract by 2 to 2.5 percent this year.
Others are even more pessimistic.
Sitting in his office a short walk from parliament, Haris Makryniotis, managing director at Endeavor Greece, which mentors and invests in small and medium-sized enterprises, puts it bluntly.
“We’ve lost 25 percent of our GDP over the course of five years, and given latest estimates we will lose another 3 to 4 percent this year,” he said. “That’s higher than the GDP destruction caused by World War II. It’s huge.”
Even tourism companies have been hit in recent months, says Mr. Makryniotis, with a reduction in bookings of around 40 percent.
“The landscape for businesses has really shortened,” he explains. “What everyone is asking for now is just some stability, to know the taxation policy for the new quarter, for example.”
While banks reopened on Monday, meaning no more dramatic scenes of Greeks lining up for hours to withdraw their 60 euro daily allowance, Greeks are still limited to withdrawing 420 euros a week per account, and restrictions remain in place for international transfers, with the government presumably worried about capital flight.
“The lines outside the banks have now been moved inside, but you still can’t do business transactions,” says Makryniotis.
He says that companies are doing whatever they can to survive. “Whether it’s international accounts, being creative with advanced payments to employees, but it’s not sustainable. The economy can’t stand another four or six months of this.”
Earlier this week Vasilis Korkidis, the president of the National Confederation of Hellenic Commerce, told local media that 60,000 Greek companies have submitted requests to move their headquarters to Bulgaria since the capital controls came into effect on June 28. While refuted by the spokesman for the government, the figure, whether accurate or not, paints a realistic take on the mood among Greek business leaders right now.
“The psychological factor is grim,” says Professor Ioannou. “It can be reversed, but parliament must establish new regulations, new taxes. The damage to Greek businesses has been huge.”
In a shared workspace down a quiet street in central Athens, Stathis Koutsogeorgos doesn’t even try to hide his disgust. The tech company he founded must now rely on the goodwill of its international creditors, since it can’t send money abroad to them even though it has it sitting in the bank.
“Right now we are at the mercy of their politeness,” he says.
Mr. Koutsogeorgos believes that six months from now less than 20 percent of the tech companies currently in Greece will still be there, with those that can moving abroad and others failing. “Would you risk it here as an entrepreneur or businessman?” he asks at one point.
A rebound lost
For companies that aren’t so able to uproot and leave, the future looks as uncertain as the last few years. “The new austerity measures will affect many companies,” says Dimitroulakos. “It is a bad cycle for the whole economy.”
His family's business has 40 employees, and they decided at the very beginning of the crisis to try to keep the same number of employees. “It’s been very hard to do that,” he says. In 2012, the staff had to agree on a pay cut of up to 7 percent in order for all to stay. “I hope it won’t be necessary to do that again in the near future,” he adds.
For those deeply involved in business in Greece, what is even more frustrating is that after five years of struggle last year things actually seemed to be improving.
“We had started to see light at end of tunnel last year,” says Endeavor Greece’s Makryniotis. “We had started to see some positive signs in sentiment, GDP growth. People felt we had seen the worst.”
This has changed. “Now entrepreneurs feel we haven’t seen the worst, that we can still go down further,” he says.