Greece’s cash-starved commerce is grinding to a halt

Greek capital controls and rationed withdrawal of money are paralysing efforts at trade

Pedestrians pass gift shops in the Monastiraki district of Athens. A lack of money in circulation is killing off economic activity. Photograph: Chris Ratcliffe/Bloomberg

Pedestrians pass gift shops in the Monastiraki district of Athens. A lack of money in circulation is killing off economic activity. Photograph: Chris Ratcliffe/Bloomberg

 

The Antymet car-recycling company northwest of Athens was already down on its luck after six years of one of the worst economic crises of modern times. Then the Greek government closed the banks.

“Every day is like Sunday,” said Alexandros Vougiouklakis, standing among stacked rows of rusting cars in the industrial district of Aspropyrgos. “There could not have been a steeper fall in business.”

Four days after banks were shuttered to halt a run on deposits by fearful Greeks, an economy already ravaged by recession, unemployment and falling wages and pensions is gradually being starved of the cash and credit lines that keep it ticking over.

Vougiouklakis, who founded the recycling plant with his brother in 2000, said he was unable to pay suppliers or carry through with orders for new machinery from China and France. Customers are nowhere in sight. “The phones have stopped ringing; we just come to the office and sit here doing nothing.”

Cash trickle

The left-wing government of Alexis Tsipras is urging voters to reject the tough terms of an aid deal with international creditors. It says the banking restrictions – capital controls – are temporary, and will be lifted swiftly after the plebiscite.

Greece’s European partners say repudiation of austerity will amount to a rejection of the euro and departure from the bloc. In that case, the capital controls will remain.

“This week, with only two working days left, the situation is manageable,” said Vassilis Korkidis, head of the National Confederation of Hellenic Commerce, a business lobby group. “As of next week, the problems will multiply.”

He listed just some of the problems faced by small- and medium-sized businesses: no access to ebanking for imports, a need to pay up front for supplies, goods stuck at Greek customs.

Korkidis said Greek exporters were unable to obtain credit guarantees from banks. Importers cannot even contract trucks to bring goods into Greece because they would likely return empty and the transport companies do not want to bear the cost. Even if a business has the money to pay for supplies on delivery, they cannot because it’s trapped in the bank and cannot be wired abroad.

SMEs account for 86 per cent of jobs in a country where one in four workers are already unemployed. More than half of such companies are already behind in salary payments.

With the European Central Bank refusing to raise the ceiling on an emergency credit line keeping Greek banks afloat, many Greeks fear the daily ration will be curtailed further, to as low as €20 per day, and are frantically cutting back on spending, shopkeepers say. All this is a major blow for an economy that just emerged from a six-year recession last year.

“The economy is freezing,” said Gerald Knaus, founder of the European Stability Initiative think tank for Southeastern Europe. “Without basic confidence in the banking sector, without a basic sense of where Greece will stand in two months, you don’t invest, you don’t borrow, you don’t buy.”

Dwindling supplies

Ta Nea

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