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Greece has not hit the bottom

12 March 2013 / 18:03:17  GRReporter
2750 reads

Victoria Mindova

"Greece has not hit the bottom yet." This is the conclusion the head of the marketing research and communication company MARC Thomas Gerakis made while presenting the 2012 market analysis on behalf of the Hellenic Confederation of Professionals, Craftsmen and Merchants. During the second half of last year, the turnover of small companies in the country fell by an average of 33% compared to the first half. 81% of companies operated with reduced turnover and the number of small and medium-sized enterprises, which stopped operating in 2012, reached 75 thousand.

The expectations for 2013 are that another 55 thousand private companies will stop operating, of which 20 thousand will be from the commercial sector. This will lead to the loss of another 195 thousand jobs in the private sector, the main victims being the employees of companies with a staff of one person and sole traders. 50% of these enterprises expect to declare bankruptcy by the middle of the year. The analysis shows that at the end of last year, one appointment was made for every four dismissals. This trend improved compared with the beginning of 2012, when one appointment for seven dismissals had been made in the private sector. Reducing the ratio between cuts and assignments was not the result of improving economic conditions but of the exhaustion of opportunities for consolidation as commented by experts.

Reducing the ratio between cuts and assignments was not the result of improving economic conditions but of the exhaustion of opportunities for consolidation as commented by experts.

The increased taxes and social security contributions combined with the lack of free capital in the market suffocate the small business and become the main reason that is killing the real economy. Around 50% of small entrepreneurs respond that they are unable to meet their tax obligations.

The state owes the enterprises VAT, which it has not been returning for years. As a result, there are no funds for reinvestment. "It was possible in the past to take a bank loan against the guarantees for the return of VAT. That cannot happen now due to the complete stagnation of the banking sector," states the head of the Hellenic Confederation of Professionals, Craftsmen and Merchants Dimitris Asimakopoulos. At the end of 2012, the debtors to the tax services increased by 25% compared with the beginning of the year and this trend is expected to worsen in 2013.

"The government should set more realistic goals for the enterprises’ payments to the public institutions," says Asimakopoulos. Currently, the law stipulates that entrepreneurs are not entitled to pay their current obligations to tax and social security funds, if they have old obligations. Asimakopoulos suggests that the law should change and allow the business to pay the current obligations and defer the payments of old ones, thus avoiding accumulating large amounts that will become unpayable in the end. Half of the respondents admit that they delay the payment of staff salaries in order to be able to cover the obligations to the state.

Over 80% of respondents state that they sold personal property or used personal financial reserves to keep their businesses alive in 2012. 43% are adamant that they will reduce the costs of salaries this year to continue to operate. Many businessmen often prefer to reduce the working hours of their employees instead of reducing the salaries in total. However, over 90% of respondents admit that the cuts of the costs of salaries have no real impact on the final value of the goods and services. A crucial role in its reduction will play the reduction of the tax burden. 84% of small companies reduced the prices of goods and services in 2012 but the increased tax burden and the higher levels of operating costs "ate" the difference.

"A dangerous trend we observe in the latest study is the dramatic reduction in investment," states Asimakopoulos. Only 5% of respondents in the poll say that they will invest in their business activity in 2013.

One in three respondents states that economic growth will not come before 2020. 45% of small entrepreneurs are adamant that the threat of bankruptcy is not over in Greece.

The expectations for the recovery of economic growth are even more pessimistic. Although the government is promising that Greece will return to positive economic growth in the middle of 2014, one in three respondents states that economic growth will not come before 2020. 45% of small entrepreneurs are adamant that the threat of bankruptcy is not over in Greece. Four out of ten have confidence neither in the Greek nor in the European banking system and say that they will not make deposits in local banks if they have available funds.

 

Tags: EconomyMarketsCrisisBankruptcyBusiness
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