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Victoria Mindova

Small- and medium-sized enterprises (SMEs) in Greece rank first among the euro area countries in the percentage of rejected projects for financing. The banks refuse to lend in the case of more than 45% of all proposals related to the funding of the real economy. This rate is two times higher than the average value established in the member states. On the other hand, the interest rates on lending to SMEs in Greece are 4% - 5% higher than the rates in Germany, the Netherlands, Austria and other European countries as shown by the study of the Centre for Progressive Policy Research (КЕPP).
 
This phenomenon, according to the researchers, is due to several factors. The first is the unrealistically high guarantees required by the banks in lending, the second is the high interest rates and the third is the very strict conditions for repayment set by the banks. In other words, the research of KEPP has proved in scientific terms the recently popular folk wisdom that "you can obtain a loan in Greece only if you prove that you do not need it".

For this reason, the economists and entrepreneurs coalesce around the idea that Europe must unite more closely to support the economy of the union. They believe that the money allocated to recapitalize the Greek banking system is not enough. The cost of public and private lending must be further reduced in order for the Greek economy to be able to start functioning.

"The bank recapitalization is not sufficient to recover the activity of the Greek financial system," states Konstantinos Mihalos, president of Athens Chamber of Commerce and Industry. The same is the opinion of former Minister of Finance Yiannos Papadoniou, who heads KEPP.

"Obviously, the policies that were applied in Greece have failed," said Papadoniou. "Our country has demonstrated exceptional punctuality in terms of fiscal consolidation and cuts but appeared unable to implement the required structural reforms." He stresses that neither the liberalization nor the privatizations, not to speak of the modernization of the state apparatus, have been put into practice, which has led to a deepening of the crisis.
 
Papadoniou admits that there have been significant improvements in the fiscal balance, the deficit has been reduced almost to zero but this all has been done at the expense of the external debt and employment. He stresses that the improved competitiveness of the country is the result of internal denomination which, in turn, is the result of reduced labour costs. However, the desired goal, namely to attract new investments, has not been achieved.

"It would be better if Europe is able to learn the lessons of America," states Papadoniou. He stresses that the United States had understood, at the beginning of the global financial crisis in 2008, that the stability of the banks was crucial for the economic development of the country. Therefore, the government had completely ignored the deficit, poured hundreds of billions of dollars into the recapitalization of the financial institutions and even temporarily nationalized some of them. Once the banks had been stabilized, they started to pour funds into the market, thus triggering the mechanism of the economy and allowing the companies to produce and create new jobs.

The economists of KEPP stress that Brussels and especially Germany insist on the wrong formula for the recovery of the Greek economy. They believe that the time for the consolidation of the European banking system and for the funding through Eurobonds is ripe. This will ensure cash flows at low interest rates, which will trigger economic growth.

According to the former Minister of Finance, while Germany prefers fiscal consolidation to the implementation of real measures to stimulate economic growth, Europe and Greece in particular will not be able to recover from the current economic crisis.