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The seven hidden cankers of the Greek economy

12 January 2012 / 13:01:29  GRReporter
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According to the report by research company Hellastat, besides the obvious structural and policy problems, Greece has seven hidden cankers that contribute to the intensifying of the financial crisis in the country. According to the survey the Iranian crisis, the export bubble, the imported raw materials and the distrust of entrepreneurs are only a part of the hidden mines in the field of the Greek economy, which is anyway suffocating under the pressure of the debt crisis.

"We are talking about seven hidden reasons that so far have been rarely mentioned in the public and that will affect the living conditions in the country and the welfare of the Greeks at present and for the future. We have analysed both the causes for their appearance and the terrible consequences they may have over the Greek economy. Rehabilitation must begin immediately," said the CEO of the company, Panos Mihalopoulos.

The empty shelves is the first aspect which subversively impedes the Greek economy mainly because the local processing industry operates mainly with imported raw materials. Foreign suppliers, however, have no confidence in the Greek financial system and do not preclude the Greek banks to collapse at any moment, despite the promises of the government for complete security of the banking system. German, American and Chinese associates of Greek producers do not take into account the well known bank guarantees and supply good only against an advance cash payment. According to the survey the situation has deteriorated dramatically in the last quarter of 2011 and this will soon be felt in reduced production volumes and the lack of goods in the stores. Researchers say it may be beneficial for the country because the imported raw materials will have to be replaced by local ones, which will intensify domestic production. The process, however, would take time.

The lack of faith in the Greek business works reciprocally and has a strong impact on the exporters. The export balloon, which was formed recently to became flat. Not because the relationship between Greek and foreign partners are unclear or because they are not satisfied with the quality of Greek products and services. This is mainly true because businessmen abroad do not know whether another strike will not be organized in Greece or any other unforeseeable event which will prevent delivery of ordered goods, or whether the banks will not "go down" without a warning and drag Greek producers down with them. The case with the reservations of large foreign tourist offices for season 2012 is also similar. They are refusing to put their customers’ deposits in Greek banks, just for the fear of sudden bankruptcy.

According to the analysts of Hellastat, the impact of the Iranian crisis on the Greek economy has been seriously underestimated, mainly because this is the last country in the world, which is still providing oil to Greece on trust. At the last summit of the leaders of the European Union, Greece and Italy prevented the imposition of sanctions on Iran, which was assessed as a great success mainly of the Greek delegation. Production in the country depends entirely on fuel imports from Iran and the fate of key sectors such as chemical industry. The production of plastics, fertilizers and other goods, depend on the Iranian "blood transfusion". If the problem in the Middle East deepened, it may prove to be more dangerous than any debt crisis in Europe for many reasons.

Distrust in the business circles reached new levels in Greece, which greatly hamper entrepreneurship, says the report of the analysts. They believe that it is unacceptable to criticize all the time the unprepared for the crisis state machine that has not prevented its negative consequences. At the same time no attention is paid to gaps in the private sector, which is not burdened by the heavy bureaucracy of the government administration and yet it does not have the tools and procedures to prevent errors and inaccuracies. Until recently checks were used everywhere in Greece, and the word of somebody served as a guarantee for its. Many people paid a high price for their naivety in some cases, and today we are witnessing the other extreme, in which nobody believes the partner in front of him.

The power of circumvention is also do a disservice to the Greek economy. Bigger and even solvent companies in 2012 will take advantage of the legally extended period for payment of debts to suppliers, which would seriously affect the liquidity mainly of small companies. Analysts believes that the games related to the payment of VAT will lead to closure of many small and medium enterprises over the next year and would deprive the Treasury of serious revenue.

Informal economy is an old canker that torments Greece. It would be beneficial to bring as much income and transactions out of it into the "light", especially in times of crisis, but unfortunately this can not be done at present. That is why the government resorted to horizontal tax increases, in order to offset the effect of the undeclared income and unreported transactions. Illegal lending and usury are also blossoming in a period when banks grant no resources and additionally hinder the healthy entrepreneurship in the country.

Stagnation on the domestic market is deepening because of the large difference between the rate of reduction of wages, which is much greater than the rate of reduction in prices of goods and services in the country. Time lag between these two processes seriously aggravates the market and mostly affects trade.

Tags: economy markets crisis Iranian crisis petrol Greece
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