Business

Greece crisis: Cronyism is killing business, firms say

anti-government protest in Greece protest in Greece
Image caption Businesses say that the government, headed by Prime Minister George Papandreou, has put its interests before the country's

The Greeks call it "Rousfeti". It means expensive political favours and cronyism.

For Nikos Sofianos, head of the Greek wood flooring company Shelman Sofianos, it's a word that sums up everything that has gone wrong with the country's economy.

He blames Greece's bloated public sector, the country's ballooning debt and the government's inability to deliver on many of the crucial economic reforms being demanded by international authorities, on a culture of "Rousfeti".

It means, he says, that political and personal interests prevail over economic necessity.

It is a point of view shared by Constantine Michalos, president of the Athens Chamber of Commerce: "The horrific example I always bring is that cleaners in the Ministry of Finance earn as much as managers in other ministries," he says.

Competing political interests inside government have made it difficult for the private sector to flourish.

That matters because if Greece is to pay back its international debt and not pitch Europe's banking system and the rest of the eurozone into crisis, the economy here needs to grow and generate enough revenues for state coffers.

"You can't keep milking a cow without feeding it," Mr Michalos says.

"If you don't stimulate the economy then you'll stagnate it completely and then there's only one way to go: Default."

Lost investment

Last year the government introduced a so-called fast-track policy for the private sector, which was supposed to encourage businesses like Nikos Sofianos' to flourish.

"Nothing has been done. I haven't seen even one foreign investment," he says. "It has not been implemented."

"I give you an example of a friend from Taiwan who operates in Romania and wanted to set up a factory here in Greece three years ago, for recycling plastic materials," Mr Sofianos continues.

"He was trying for one and a half years. He was going from ministry to ministry.

"So the Ministry of Economics was asking one thing, but the Ministry of Environment didn't accept what the other ministry was asking."

In the end, his Taiwanese friend gave up.

"If you want to invest 5 or 10 million euros and you come in and this country does not support you at all and faces you like an enemy... then people are fed up and they leave."

"As a society, we do not realise that these investments will give places of employment," Mr Sofianos says.

Plans halted

Image caption Austerity cuts and job losses are also hitting businesses hard as consumers have to cut back

George Peristeris, chief executive of Gek Terna, a large Greek energy company, has also been stymied by government bureaucracy.

Last year, encouraged by Prime Minister George Papandreou's plan to transform the country into a green economy harnessing its abundance of sun and wind, he tried to set up an offshore wind project in the Aegean Sea.

His project - along with several other similar ones put forward by other energy companies - came to an abrupt halt when the government decided large-scale renewable energy projects should be managed by the state and not the private sector.

A year later he's still not clear why the government made a u-turn, but he qualifies his criticism: "In the energy sector it's not easy to set up a business anywhere. That's not just Greece, but also in France or Spain."

Empty tills

Even for businesses that do have the necessary papers, getting financing in the midst of the country's economic crisis is becoming ever more difficult.

"Proposals by healthy companies are not accepted by banks at the moment simply because there is no money in their tills," says Mr Michalos of the Athens Chamber of Commerce.

Banks, he says, are being coerced by the government into buying national bonds to support the economy. "There is a limit to these actions," he says.

"Everyone has to realise that if the business sector does not survive, then the rest of the economy won't survive."

In the meantime, Nikos Sofianos' flooring business is down some 70% from last year in terms of revenues.

With salaries, pensions and perks being cut in the public sector - which accounts for about a fifth of the total workforce - and a struggling economy overall, people don't have money to spend on things like a new wood floor.

Take Dimitris Dimiroulis. His salary at the Panteion University in Athens has been cut by about 20% in the past year, and he fears it may go down by 40% in the year ahead.

"You have to be very, very careful in your expenses," he says. "And you have to save some money for a future that does not look very promising."