The Greece crisis - a perspective from Greek businesses
01 March 2012
By Richard Boxshall
On February 21, the Greek government and its Eurozone partners ended weeks of uncertainty and agreed a second bailout package avoiding, in the words of Greece’s finance minister, the ‘nightmare’ scenario of a default and possible exit. The package provides Greece with funding for the next two years and a reduction in the value of its outstanding debt. While this agreement should provide some respite, it does not mean an end to the crisis in Greece nor the uncertainty in the Eurozone.
For this package to stick and for Greece to rebuild its economy inside the Eurozone, the country will need to undertake a deep and painful adjustment to become competitive again. The adjustment will require a further fall in real incomes that will test the resolve of the public and extensive policy reforms that will test the capabilities of the Government.
I was in Athens as this package was being negotiated to discuss with our clients ways in which the crisis might play out and to help them prepare contingency plans to manage through the risks. I learned a lot in the course of those discussions about Greek businesses’ views on the crisis.
Businesses have been fighting for their survival against harsh economic conditions for a while – the Greek economy is 17 per cent smaller today than it was 3 years ago and the stock market has lost over 80 per cent of its value from its peak. The businesses that have survived complain of a lack of stability in the tax system, increasing tax burdens, and limited access to finance for growth. Interestingly, wages is much further down their list of concerns.
The workforce in these businesses has also been shrinking – unemployment is the second highest in Europe at 20.9 per cent – and it was clear that some of the people I met were fighting for their jobs and livelihoods. Unsurprisingly, this has created a sense of pessimism and uncertainty. This is reflected in PwC’s recent survey of leading CEOs; the majority surveyed (80 per cent) said that they are changing their business strategies as a result pessimistic economic growth forecasts and 41 per cent said that they expect to reduce headcounts further this year.
But perhaps the most important and encouraging message I picked up is that business leaders are now placing a stronger emphasis on skills, training, and staff productivity. This is one of the essential ingredients for securing Greece’s long term prosperity inside of the Eurozone. The other will be the expeditious implementation of the Government’s reform programme. On this the business leaders are circumspect. One business leader I spoke to suggest that the Government may have to look towards the private sector to help it deliver these reforms.
Despite the daunting outlook, one message I heard very clearly is that Greek business leaders want to stick with the euro. This is confirmed in a survey by the Athens Chamber of Commerce and Industry which found that 71 per cent of its members wanted to stay in the Eurozone. The challenge for policy-makers is to deliver the stability which business is looking for.
Contact: Richard Boxshall | +44 (0) 20 721 32079