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Pessimism begins to completely seize the Greek business

30 April 2013 / 19:04:00  GRReporter
2313 reads

Victoria Mindova

Just a day ago, Greece adopted another complex law to reform the domestic economy, which has ensured the payment of the next tranche of 2.8 billion euro. The money has been transferred to the Greek account shortly before the Easter holidays, when part of the pensions and public sector wages must be paid.

Although the country has received more than 150 billion euro in financial aid since the launch of the rescue programme in 2010, the local economy is suffocating under the burden of fiscal consolidation and prolonged recession. "The taxes on the business are unbearable," a private accountant told GRReporter. She states that the turnover of the companies that she is serving has fallen by between 50% and 60%. The cuts in the staff and the reduction of the salaries of the other staff are not sufficient to cover the contraction of trade. The liquidation of these companies is not an option either because it will be followed by seizures, which will be insufficient to cover the liabilities accrued.

"All the companies have entered into arrangements for deferred payment of their obligations to the state. The tax burden in Greece has significantly increased at a time when the economic activity has fallen to levels known from the late 1990s. This is not the case of one or two companies in the country. Almost all small- and medium-sized enterprises are on the brink. Quite a few large corporations are in a similar situation as well."

According to the specialist, the disproportionately high level of taxation is the root of the problems of the Greek business. The first priority of the entrepreneurs is the payment of the obligations to the state - VAT, income tax and social security of the employees. Often they do not have funds left to pay the salaries of the staff in time. Every single bank refuses to issue guarantees and chequebooks to the companies and the suppliers do not deliver production for processing and raw materials if they do not receive in advance a larger part of the amount due. "I have not heard of a company in Greece that has not ended up in this situation," said the accountant.
 
"Until a year ago, many of my colleagues and I were of the opinion that after the country forms a government and the political situation stabilizes, there would be some progress and the economic situation would start to slowly improve. Nothing like that has happened. I do not believe that things in Greece will be better off," said the woman. According to her, the country will continue to go down unless real incentives for economic development are found and the taxes are reduced.

The same is the conclusion of the members of the Athens Chamber of Commerce and Industry (EBEA). It is based on the results of a poll, which they carried out at the end of April. 72% of respondents say they are pessimistic about the economic development of the country. A slightly higher percentage (77%) says they are also very negative towards the idea of ​​personal success in the current economic situation.

"I worked eight months without pay before I left," says an installer of aluminium windows. He is now working at the plant, which was supplying his former company, but the salary is twice as lower. He feels deep uncertainty about his future, because the plant in which he is now working might close in the next year.

The data from the poll of the Athenian merchants show a slight improvement in the sentiment of the public opinion compared with the same period last year, but this does not have a major impact on the overall picture. Pessimism had almost completely seized Greece in the spring of 2012, when the country was on the threshold of new early elections. After the failure of the first parliamentary elections in May last year, the negative sentiment was record high and the index measuring pessimism reached 93%. Now, the trend is repeated.

People's belief that the country is going in the right direction is shaken again. Only 18% of respondents in the poll believe that the signing of the Memorandum of financial support has been the right decision. More than half of respondents believe that the government should have a more robust stance against the requirements of the international lenders, and one in four wants the government to resign and schedule new early parliamentary elections.

People are concerned that if the fiscal consolidation plan fails to be implemented and the revenue in the treasury is less than planned again, increases in tax rates and wage cuts would follow again. "This lemon will soon be squeezed out," said the accountant, who is anticipating dramatic social changes, if a new healing formula is not found. Currently, a taxpayer who receives a net wage of 1,000 euro works three months a year just to pay the income tax. If the same citizen owns a car and a flat in his or her name, the tax burden increases.

At the same time, the rumours of a cabinet reshuffle are becoming more persistent. People want an immediate change in the social policy pursued. Fifty percent of respondents in EBEA’s poll say that a sharp turn should be made as regards the measures that affect the daily lives of citizens. Unemployment continues to grow and it will soon reach 30%. Over 60% of young people under the age of 25 are outside the labour market and cannot find an opportunity for professional development.

21% of people have no opinion about what the government should do in order for the economic situation in the country to change for the better. EBEA estimates that passivity is due to the general frustration that is taking hold of the real economy.

Tags: EconomyMarketsGreeceCrisisPessimismBusiness
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