Tuesday 23 January 2018

Greece crisis: Greek businesses face closure as parliament votes on second bailout bill

Queues outside an Athens bank yesterday
Queues outside an Athens bank yesterday
REFILE - CLARIFYING BYLINE Greek Prime Minister Alexis Tsipras looks on during a swearing in ceremony of members of his government at the Presidential Palace in Athens, Greece, July 18, 2015. New ministers in Greek Prime Minister Tsipras' government were sworn in on Saturday after a reshuffle expelled dissidents from his cabinet and began a new phase of negotiations for a third bailout package. REUTERS/Alkis Konstantinidis
European Union Commission President Jean-Claude Juncker
Greek Prime Minister Alexis Tsipras arrives at his office in Athens just after flying in from Brussels
A protester attracts a swarm of photographers as she burns a Syriza flag outside the Greek parliament in Athens
Taoiseach Enda Kenny arrives for the meeting in Brussels yesterday
Greek Finance Minister Euclid Tsakalotos attends a parliamentary session in Athens
Greek prime minister Alexis Tsipras
A pensioner wearing an oxygen line tries to enter a crowded National Bank branch to get her pension in Thessaloniki
Greek Finance Minister Euclid Tsakalotos and IMF managing director Christine Lagarde (back centre) at the eurozone finance ministers meeting in Brussels yesterday
Greek Finance Minister Euclid Tsakalotos (L) and former finance minister Yanis Varoufakis talk during a parliamentary session in Athens
Outgoing Greek Finance minister Yanis Varoufakis leaves on his motorcycle with his wife Danai after his resignation at the ministry of Finance in downtown Athens this week
An anti-austerity protester stands in front of Greek parliament in Athens
People queue for free food in the Greek capital
President of the European Commission Jean-Claude Juncker

Greece risks seeing a wave of companies forced out of business within weeks because of restrictions on foreign transfers that have persisted even after banks reopened this week, the head of the Athens Chamber of Commerce warned.

In a letter to the finance ministry, Constantinos Michalos said the restrictions meant that companies which relied on foreign suppliers were unable to pay their bills, creating "huge problems" in many sectors.

"We must tell you that the vast majority of Greek companies are a step away from being forced to shut down operations," he said in the letter, made public by the Athens Chamber of Commerce.

He said that if capital controls were still in place by mid-August, companies would start going out of business.

There was no immediate response from the ministry.

Following last week's agreement with foreign creditors that unlocked emergency European Central Bank credit for the tottering banking sector, bank branches have reopened this week, with slightly more flexible withdrawal limits.

But while that has been welcome to individuals, the letter is the latest sign that businesses have seen little relief from the end of the so-called "bank holiday".

"All the money that the country got in these days after the deal has gone to salaries and pensions and resupplying ATMs with cash. There was no allocation for bank transactions for the companies," Michalos told Reuters.

He cited the example of a large company in the food sector, which applied to the committee set up to approve foreign transactions for permission to pay 650,000 euros ($700,000) for imported supplies. Only 9,000 euros was approved.

"This is not even funny. The company will be unable to operate, and they are one of the biggest players in the Greek market," he told Reuters. "How will they keep open and keep their employees if they can't produce?"

Although Athens is due to start negotiations over a third bailout package worth up to 86 billion euros, doubts remain over whether the agreement can be concluded and whether Greece will manage to meet the tough conditions attached.


Alarmed by the uncertainty facing Greece and speculation that it could be forced out of the euro, many foreign suppliers of Greek companies have taken a hard line, scrapping their normal settlement periods and insisting on payment upfront as they assess their position.

Even well-established Greek businesses have experienced problems with suppliers more concerned about the overall situation of the country than about the position of individual clients.

"Many of them, which have been paid normally within 60-90 day in the past, have started asking for advance payments since capital controls started," said Vasiliki Mourafeti, purchasing manager for Pitsos, Greece's largest producer and importer of electronic devices.

"We import screws, chemicals, plastics, metal sheets, handles and electronics for our production. Suppliers that send us materials every two weeks have told us that Greece is bankrupt and they weren't willing to deliver any more unless payment was in full and in advance," she said.

For large companies with foreign connections like Pitsos, part of German consumer electronics group BSH, there are ways to settle bills using existing foreign accounts but the problem is also affecting domestic suppliers as well.

The tougher conditions have created shortages and backlogs right along the production and supply chain, with ripple effects that can pop up in sometimes unexpected ways, complicating life for business already dealing with severe economic crisis.

Dimitris Koutroubas, head of procurement at Sidenor, the largest steel producer in Greece, said that foreign subsidiaries enabled it to smooth problems with paying suppliers outside Greece but everyday business had become much more complicated.

"Our current problem now is that we have some supplies that we pay for in cash against documents," he said. "The materials have arrived at the port and they can't pass through customs, as we have to give them documents that are at the bank, and the bank cannot provide us with the documents as they can't pay."

Many foreign suppliers are unwilling to comment on the record about the issue given the political issues surrounding the situation in Greece but it is clearly being watched closely.

"There is a lot of sensitivity around Greece and the way I read it right now, people aren't yet fully sure that this is all in the clear," said Till Dudler, Managing Director for Strategy, Consumer Goods and Services at consultants Accenture. "People are fairly risk-averse in this space and they're going to see how it plays out."

Last night Tsipras tried to rally his Syriza party before a vote in parliament on the second package of measures demanded by international creditors to open talks on a new bailout deal.

Tsipras has faced a revolt in the left-wing Syriza party over the mix of tax hikes, market reforms and spending cuts demanded by lenders but is expected to get the package through parliament with the support of pro-European opposition parties.

Talking to Syriza officials on the eve of the vote, he said he aimed to seal the bailout accord, which could offer Greece up to €86bn in new loans to bolster its tottering finances and ward off the threat of a forced exit from the euro.

"Up until today I've seen reactions, I've read heroic statements but I haven't heard any alternative proposal," he said, warning that party hardliners could not ignore the clear desire of most Greeks to remain in the single currency.

"Syriza as a party must reflect society, must welcome the worries and expectations of tens of thousands of ordinary people who have pinned their hopes on it," he said, according to an official at the meeting.

Earlier government spokeswoman Olga Gerovasili said the government expected to wrap up bailout talks with the lenders by Aug. 20 with negotiations expected to begin immediately after Wednesday's vote in parliament.

Officials from the creditor institutions - the European Commission, European Central Bank and International Monetary Fund - are due in Athens on Friday for meetings with the government, Deputy Finance Minister Dimitris Mardas said.

Wednesday's vote in parliament follows a first vote last week on the so-called "prior actions" on the mix of economic reforms and budget cuts demanded of Greece as a condition before the start of full bailout talks.

The bill was passed but a revolt by 39 Syriza lawmakers who refused to back the measures raised questions over the stability of the government, which came to power in January on an explicit anti-austerity platform.

Together with his coalition partners from the right-wing Independent Greeks, Tsipras has 162 seats in the 300-seat parliament. But last week's rebellion cut his support to just 123 votes and any further defections may be seen as undermining prospects for reform.

Some government officials have suggested that if support dropped below 120 MPs - the minimum required to win a confidence vote if parliament voted with the lowest allowable quorum of 240 lawmakers - Tsipras would have to resign.

But it is unclear whether he would step down. If a confidence vote were actually held, he would almost certainly win with the backing of the pro-European opposition parties.


Promoted Links

Promoted Links

Business Newsletter

Read the leading stories from the world of Business.

Also in Business