Greek businesses fall down by the dozen
Trouw, 13 July 2011

It takes a while for the door to open. A middle aged woman excuses herself. She hadn't heard the knocking and not that many visitors come around here these days. Sorry, but do come in. She steps aside and clears the way to the dark and seemingly deserted offices of International Technological Improvement Ltd. (ITI), a company that equips marina's and was flourishing until recently.

Owner-director Alessandro Giani gets up from behind his desk. "I will show you around. Then you can see what the crisis in Greece really means." The tour leads from one room to another, past neatly organized and empty work places. There are no lights on and although the temperature outside is well above 30 degrees Celsius, the air conditioners are switched off. "At the end of last year I had eight people on the pay roll, now they're only four, and two of them work part-time. I have 30 to 35 percent less orders. When your turnover goes down, you need to cut back on your costs", Giani says.

The tour comes to a halt in front of a map of Greece. "Look at all those islands. They all need harbours. The work is there. The municipalities and port authorities also have the money, but they simply refuse to pay. They wait to see what's coming." In the meantime businesses like ITI every month need to pay their bills and taxes. But no bank is willing to give them credit on the basis of a government contract, no matter how many digits are on it. "I started this company in 1985 and now for the first time in my career I'm begging my suppliers: please, give me a little more time."

The case of ITI, a business with an annual turnover of about 1.5 million Euros, is not exceptional in Greece these days. But not that many entrepreneurs are willing to talk openly about their problems. Many have debts or use the crisis as an excuse to put the squeeze on their employees, trade unions and business associations say. Others survive by using the black money they have accumulated over the years. In short, nobody needs attention. But in the streets of Athens the dark office buildings and white washed shop windows are difficult to ignore.

Small and medium enterprise (SME) is the backbone of the Greek economy and accounts for 37 percent of the domestic product. And it is going through hard times. "Since 2010, 80,000 smaller businesses have closed down", says Constantine Michalos, president of the Athens Chamber of Commerce and Industry. "Over 60 percent of Greek businesses have financial problems and when things continue this way, another 120,000 will close before the end of the year." On a total of 960,000 SME's that number is dramatic.

Like Giani, Michalos sees that small businesses no longer get credit, while the bigger companies and government bodies they work postpone their payments. Delays of 150 to 180 days have become common practice. Add to that a total tax pressure of some 52 percent for companies and you have a recipe for economic disaster. "Most Greek companies are healthy", Michalos says. "But if the banks don't change their behaviour they will fall down. Simply because they cannot get credit."

A few streets away from the Chamber of Commerce a man in his fifties is drinking iced coffee on a pavement terrace. He knows exactly what Michalos means. In 1988, he took over the business in packaging materials, that his father had started twenty years earlier. Now he is about to close shop. No names, because in Greece it is difficult to admit you are on the verge of bankruptcy. Within two years his annual turnover decreased from over two million Euros to less than 400,000. Of his eight employees only one is left. And not for long.

His problems started in 2008, when his Western European suppliers, feeling the crisis, limited his credit period. "Greece at that time was still fast asleep. Here everybody started paying their bills later and later: 90 days turned into180 days. The whole country was living on credit. That was just how it was. But in the meantime I had to pay my bills in Germany within 45 days. And now, as a Greek company doing business in the West, you need to pay everything in cash."

Borrowing money was the only solution. But banks want firm guarantees. "First you use your company's assets, then your house, and next your mother's house... And because you built up debt after debt you turn into a bad company. I owe 800,000 Euros to the bank and I have lost everything I ever had. I try to start new things, but the business climate is crazy over here. In one year the government has changed the tax law six times."

Michalos, from the Chamber of Commerce, also worries about the unstable business environment in Greece. The current austerity measures are directed too much at tax raises, while it remains unclear how the government intends to decrease the enormous public expenses. "The austerity package is necessary. Let me be very clear about that. But what they propose is not in the interest of the economy. Especially now, we need a healthy and internationally competitive business climate."

According to Michalos the European Social Fund should hand over the 20 billion Euros that are reserved for Greece. The money is currently blocked because Greece cannot pay the obligatory state contribution of another 10 billion Euros. "But this money could flow directly into the Greek economy. And at a later time they can ask for the government contribution. If we don't take action fast, the Greek economy will shrink further and unemployment will increase. In some parts of the country already almost have of the 18 to 25-year-old's are without work. The government cannot continue to take only from the poor and the pensioners. In a little while, nobody will have any money left to spend."

The purchasing power of Greek consumers has already diminished, says Georgia Kravarioti. Ten years ago, together with her sister she set up a shop for children's clothing and furniture in an Athenian suburb. To attract more customers, the sisters opened up a web shop as well, and that is what now keeps them alive. To decrease their monthly expenses, they think about turning the physical shop into a storage facility. "We sell less and less, but have to pay more and more", Kravarioti summarizes the problems. "Especially because of all the taxes and because we have to pay our foreign suppliers in cash. At the moment the situation is stable, but we can no longer live from the shop."

It is illustrative for the severity with which the crisis hits Greece, she thinks. Greeks do no easily save money on account of their children. Instead they spoil them. "But when they come to our shop, they bargain on everything. And they mistrust you. They think you try to cheat on them with everything you do. It's another reason for closing down the store. Our enthusiasm is gone."

Kravarioti looks away and bites her lip. "You know, I had a very modest dream. I wanted a nice shop, a normal income and a family. But that dream is over now." Then she pulls herself together. "We invested so much time and so much money in this shop. We cannot just start from scratch again. The only sensible thing for us to do, is to go on."