People and businesses struggle to come to terms with the fallout from Greece’s debilitating debt crisis. The Athens News Editor provides an update on the crisis and discusses personal interviews which offer an inside perspective into the current events in Greece.
Petros Kapsalis would have been forgiven for thinking he was digging a gold mine when, 15 years ago, he helped his brother and father excavate the hole that would contain the swimming pool at their family’s hotel on the Ionian island of Zakynthos. The 42-year-old now speaks with undisguised nostalgia when he recalls the decade that followed, when the hotel ran at near full capacity from May to October. There have been just five bookings at the hotel so far this season and he is pinning his hopes on last-minute bookings from mid- June. “I’ve had people calling me from England asking how much a beer and a sandwich are,” he says. “They’ve heard so much about the austerity measures here and how expensive Greece has got and they’re frightened. I tell them the cost of beer hasn’t changed. I’ll absorb that price rise for now. But how can I go on doing that when it costs 27 euros for a bottle of vodka, up 40% from last year.” Petro’s story is representative of thousands of others across the country as people and businesses struggle to come to terms with the fallout from the country’s debilitating debt crisis.
GREECE FALLS FROM GRACE
With a budget deficit of 13.6% of GDP and a public debt of 310bn euros, the country was – in Prime Minister George Papandreou’s words – effectively bankrupt before the EU and IMF established a three-year, 110bn euro bailout fund. The package guarantees 80bn euros in EU bilateral loans at 5% interest, and a further 30bn euros from the IMF at 2.75%. In the days immediately before the bailout was agreed, borrowing rates on the open market topped 10%. The trade-off has been the introduction of unprecedented austerity measures that have seen rises in taxes, deep cuts in public sector salaries and sweeping pension changes that foresees the entire workforce working significantly longer for less. The aim is to cut spending by 36bn euros over three years and lower the budget deficit to 3% of GDP in 2013, the maximum level allowed for eurozone members. No one could have anticipated such a fall from grace during the market optimism that greeted the introduction of the euro on 1 January 2002. In traditional cafes across the country, people now discuss the merits of returning to the drachma, despite the many visible benefits and economic stability the European currency has brought. “What’s the difference?” says hotelier Petros, adding “The cost of living. It’s killing us. We were once the cheap destination of Europe. Now people are traveling elsewhere – Bulgaria, Turkey – there are so many countries cheaper than here.”
Tourism, which accounts for a fifth of the country’s 240bn euro economy and employs one in five workers is down 10% so far this year, following a similar trend in 2009. And the killing of three workers during a firebomb attack on an Athens bank during antiausterity protests on May 5 have done nothing to improve the image of the country abroad. There were, according to the Athens-Attica Hotels Association, 27.000 nights cancelled in the capital’s hotels in the days after the incident. Travel websites have since been awash with potential tourists asking whether the country is safe. With the issuing of building permits – the key indicator in the previously booming construction industry – also showing a 20% decline this year, the unemployment rate has crept above 12% and is expected to rise further. For 18-24-year-olds the rate is 30%. ICAP, a regional business services group, announced in mid-May that one in three Greek enterprises reported losses last year, with the manufacturing showing an 18.7% decline (or 4.2bn euros) and sales in commerce down 8.7% (296mln euros).
At the same time, consumer tax (VAT) has been increased to 23% and a oneoff levy of 4% is being applied on corporate profits of up to 300.000 euros. For profits over 5 million euros that rises to 10 percent. The doom and gloom pervading an outlook that forecasts the economy to contract by 4 percent this year (recently revised upwards from 2 percent by the government) and 2.6 percent in 2011 does, however, belie the fact that some areas have managed to partially buck the trend. Asked how the difficult economic situation has affected the airline industry, Terry Flynn, Emirates manager for Greece and Albania, points out that first-quarter traffic at Athens International Airport was positive this year, with 3.17 million passengers and 44,600 flights, an increase in 10.4% and 5.2% respectively on last year’s figures. “Demand on the Athens-Dubai route [for Emirates] remains strong,” he says. “And as June-July are peak times for Greece, a healthy growth is expected.” He also emphasizes the airline has managed to increase staffing levels at a time when others are cutting back. Other difficulties, such as the volcanic ash cloud from Iceland and the “challenging” business environment globally should be borne in mind when analyzing the situation in Greece, he said. Beyond tourism, Greece is, of course, dependent on shipping. And here, too, there has been no escape from the financial troubles. Though trade remains healthy enough due to the global nature of the industry and shipping companies receive generous tax breaks, questions remain about the viability of the next generation of ships and ship owners. “The main difference is that ship owners just can’t get mortgages,” explains an established ship broker, who spoke on condition of anonymity. “It’s slowing down new buildings and the purchases of second-hand vessels. And we’re not just talking about the new boys. Traditional family ship owners will always be looking to renew their fleets. The banks aren’t supporting them, and when they do the rates and terms just don’t make sense.” Perhaps most worrying for the economy, those same owners were part of a trend that recently saw, according to local media, billions transferred out the country when there were fears of default – or at least a restructuring of the country’s debt. “Every ship owner I know has done it,” says the broker. “The government says savings are safe but what you’re told here isn’t always what ends up happening.”
Elina Psimitis, president and CEO of Psimitis Greece, offers ideas on how excellent companies can survive the economic crisis.
The Great Place to Work. Institute list has been a very useful tool which helps us to undertake a benchmarking against ourselves and against the best organizations across different sectors. This endeavor has been very useful in aiding us to create an improved, better managed, healthier, and well organized company. This journey to excellence, the effort and its beneficial outcome is what matters to us. Based on the experience, the achievements and the learning of the contest we are working together with our people, with positive attitude, open communication, inspiration and trust across all levels of employees and movement. Contrary to other organizations, we invest in staff development and empowerment and we focus on our employees with commitment because our people are important to us. Trying together, management and personnel, we create innovative ideas that will help us pass through the crisis safely and lead our company to a new era.
The images are courtesy of Staatliche Museen zu Berlin and come from vases and are taken from the book “Greek Vases: Gods, Heroes and Mortals” published by Scala Publishers Ltd in 2010.
Published in the hard-copy of Work Style Magazine, Summer 2010