Return of bailout monitors fails to lift Greek gloom

3/2/2017

Return of bailout monitors fails to lift Greek gloom

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Greece Debt Crisis

Return of bailout monitors fails to lift Greek gloom Uncertainty puts business investment on hold despite prospect of fresh funding

An olive oil processing plant in Greece © Bloomberg FEBRUARY 26, 2017 by: Kerin Hope in Athens

For Christian Hadjiminas, who owns a company that makes nightvision equipment, the return on Monday to Athens of EU and International Monetary Fund bailout monitors will come as a “huge relief”. “We’re grateful that we’re not going over the cliff,” says Mr Hadjiminas, referring to a two month long dispute between the Greek government and its creditors that revived fears of a rerun of 2015, when Athens defaulted on an IMF debt payment and came close to crashing out of the euro. The latest standoff, which extended to a rare public clash between the EU and the IMF over the sustainability of Greece’s bloated debt (https://www.ft.com/topics/themes/Greece _Debt_Crisis) was resolved after Athens accepted in principle to adopt tax and pension https://www.ft.com/content/c3f4309efa7c11e6bd4e68d53499ed71

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reforms pushed by the fund. The IMF says the measures are needed if Greece is to hit fiscal surplus targets in 2019 and beyond. The concession opens the way for Greece to receive bailout funding to cover a €7bn debt payment due in July. But even though the bailout talks appear to be back on track, the prevailing mood in Greece’s business community is one of uncertainty tinged with gloom. Exporters such as Mr Hadjiminas’s company, Theon Sensors, that have weathered the country’s sevenyear recession still have to contend with capital controls, a tight squeeze on bank lending and a spate of tax and social insurance increases targeting mediumsized companies and selfemployed professionals. “We’re watching the same film repeat itself: the economy gets to the point of starting to grow, then there’s a stalemate [with the creditors],” Mr Hadjiminas says. “You can’t plan in this situation, you just try to survive.” Greece’s economy (http://next.ft.com/content/6be7a4d5bb2332a1a7d8035ed7b35348) shrank 0.4 per cent in the final quarter of 2016 after growing 0.9 per cent in the third quarter, confounding earlier forecasts that the country was finally headed for a period of sustained growth. Greece is projected by the EU to grow 2.7 per cent this year. Some analysts believe footdragging by Athens over the bailout talks contributed to the fourthquarter contraction. “The protracted standoff with the creditors gives rise to uncertainty and this is hurting the real economy,” says Miranda Xafa, a researcher at the Centre for International Governance Innovation thinktank. “If this situation continues until May or June, this year’s expected recovery will be thwarted.” Read more

A lack of trust is blighting Greece (http:// next.ft.com/content/c84 d021b-777d-36eb-8fcf-f e38fa07f675) https://www.ft.com/content/c3f4309efa7c11e6bd4e68d53499ed71

One Athens consultant said more than €500m of projects in tourism, manufacturing and energy were on hold because of concerns over the sustainability of the current €86bn bailout programme.

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Whatever agreement is reached, it will not solve the issue definitively

“Investment can’t happen and new jobs aren’t created when businesses are held hostage by uncertainty” says Athanasios Savvakis, president of SBBE, a northern Greek business association. “The [bailout] review has to finish as soon as possible.” Yet Greek prime minister Alexis Tsipras is in a

difficult position, with many in his own Syriza party increasingly unhappy over his apparent willingness to make concessions on issues previously dubbed “red lines”, such as further cuts to pensions, lowering the threshold at which people start paying income tax and labour market liberalisation. To make matters worse, economic indicators suggest Greece may be moving back into recession. Nonperforming Greek bank loans rose sharply in January after stabilising earlier in the year, while net job losses the same month rose to 30,000, five times higher than the previous December, according to the labour ministry. Podcast

Kostas Michalos, president of the Athens Chamber

Greece’s debt crisis (http s://www.ft.com/content/2 3c87fe8-b0e2-4064-bb8 6-074ed34cc95d) Six years after its first bailout, Athens is looking to its creditors, the IMF and the EU, for fresh help

of Commerce and Industry, says last year’s sharp rise in corporate tax rates and employers’ social insurance contributions shuttered many family owned businesses that had struggled on through the recession. “Even families that have funds available aren’t investing because of the unstable environment,” he says. Noting that 6,000 fewer companies registered with the chamber last year, he adds that many moved to Cyprus or Bulgaria where the tax and

(https://www.ft.com/content/ 23c87fe8-b0e2-4064-bb86-0 74ed34cc95d) https://www.ft.com/content/c3f4309efa7c11e6bd4e68d53499ed71

welfare burden is lower.

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And while Greece’s struggling business community will take comfort from the return of the international monitors, the fiscal plans emanating from Athens could bring further pain. As part of the move to cut tax evasion by the self employed and boost state coffers, experienced professionals in Greece could end up paying up to 70 per cent of their income in taxes and social insurance. For Mr Hadjiminas, who is already dealing with the departure of skilled engineers, this may be the final straw. “We were already losing several people a year who went to jobs abroad,” he says. “Now there will be even less incentive to stay.” Print a single copy of this article for personal use. Contact us if you wish to print more to distribute to others. © The Financial Times Ltd. Read latest Fast FT

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