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Why business is leaving Greece

18 September 2013 / 16:09:34  GRReporter
3790 reads

Greek entrepreneurs are "responding" to the indifference of the government and, in particular, to the lack of interest on the part of the Ministry of Finance regarding the development of a ​​clear and stable framework for the operation of business in the country by transferring their business abroad.

Instinct for survival

Experiencing the sixth consecutive year of recession and of government inaction, the big companies, being forced to emigrate, are already following their instinct for survival.

It is now a matter of life and death for the business to transfer its operations abroad, which is indicative of the inability of the government to reverse the negative trends.

The decision of "Viohalko" to transfer its headquarters to Belgium could have stricken journalists like a thunderbolt but no one who is aware of business processes is surprised. A few days ago, the Union of Entrepreneurs and Industrialists expressed its concern regarding the risks of the policy applied to the company as well.

However, the decision did not surprise the government, not to speak of responsible Minister of Regional Development Kostis Hatzidakis who yesterday said in a statement for a TV channel, "this is not a pleasant state of affairs but it is not a catastrophe either."

He had even expressed his satisfaction with the fact that the company had decided not to transfer its production activities abroad and, regarding the probability of it leaving the Stock Exchange, the Minister said that the issue was within the competences of the Ministry of Finance.

Formally speaking, the specific statement of the Minister of Development is not a problem. In practice, however, there is a huge problem because this proves that, even when the forces of production and the whole of society are making huge efforts to restore the economy, the government and its various ministries are adhering to formalities. There is no essential connection between the relevant ministries and even the Prime Minister himself is not making efforts to coordinate their activities.

It should be noted that the Prime Minister visited the Ministry of Development on 9 January for the last time, when he said, "You will see me here once a month." Another visit followed on 8 March when he met with young entrepreneurs.

As for the heads of the relevant ministries, namely Finance Minister Yiannis Stournaras and Minister of Development Kostis Hatzidakis, they have never officially met although their offices are located in the same building on Syntagma Square.

The simplification of procedures is slow

One of the main problems facing businesses today is constituted by the complex procedures for obtaining licences. Not a single problem has been solved although these findings have been known for years.

A few days ago, the Minister of Development announced his intention to propose a new legal framework through which to simplify the procedure for issuing licences.

However, it will take at least two years in order for such a framework to be implemented in the case that the other ministries agree with it as well.

At the same time, the Ministry of Development, the World Bank and the Organisation for Economic Cooperation and Development who are cooperating together have detected 500 obstacles of various kinds that are hindering the business.

However, the route from the findings to addressing the issue is long and this fact questions the launch of the procedure which will deal with the difficulties.

"Slow death" because of the lack of liquidity

The lack of funding by banks is the reason for large companies leaving Greece and for the "slow death" of the companies which remain in the country. Even viable companies are deprived of liquidity, as the banking system, before and after the recapitalization, appears to be unable to play its role in financing the economy. It is significant that, in the first seven months of this year, the negative flow of funding exceeded 3.5 billion euro.

The expectations of funding for the real economy after the recapitalization are receding and the banking system is claiming that this is due to its own "funding gap" of 60 billion euro which, in turn, is due to its inability to obtain funds from the international markets and to the reduction in deposits. Even the European programmes which require the assistance of banks are almost inactive and do not allow the "unburdening" of the market.

The resumption of funding is associated with the strengthening of the deposit base and the reduction of bad loans. These processes are correlated with the economic recovery which, on its part, requires support from the banks. This vicious circle still exists at a time when the assessment of BlackRock and the pressure for restructuring are leading to a contraction in activity rather than to the necessary support for the market.

The net flow of funding was negative in 2011, as it decreased by 8.1 billion euro in comparison with the positive flow of only 50 million euro in 2010 which is indicative of the continued suffocation of the economy. However, underfunding is not the only problem. The cost of funding is such that it is making it almost impossible for the companies to obtain a loan, thus forcing those of them, which are able to do so, to seek access to international markets.

Tags: CompaniesMinistry of financeRecessionCrisis
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