ATHENS (Reuters) - Greece risks seeing a wave of companies forced out of business within weeks because of restrictions on foreign transfers that have persisted even after banks reopened this week, the head of the Athens Chamber of Commerce warned on Tuesday.
In a letter to the finance ministry, Constantinos Michalos said the restrictions meant that companies which relied on foreign suppliers were unable to pay their bills, creating “huge problems” in many sectors.
“We must tell you that the vast majority of Greek companies are a step away from being forced to shut down operations,” he said in the letter, made public by the Athens Chamber of Commerce.
He said that if capital controls were still in place by mid-August, companies would start going out of business.
There was no immediate response from the ministry.
Following last week’s agreement with foreign creditors that unlocked emergency European Central Bank credit for the tottering banking sector, bank branches have reopened this week, with slightly more flexible withdrawal limits.
But while that has been welcome to individuals, the letter is the latest sign that businesses have seen little relief from the end of the so-called “bank holiday”.
“All the money that the country got in these days after the deal has gone to salaries and pensions and resupplying ATMs with cash. There was no allocation for bank transactions for the companies,” Michalos told Reuters.
He cited the example of a large company in the food sector, which applied to the committee set up to approve foreign transactions for permission to pay 650,000 euros (£457,143) for imported supplies. Only 9,000 euros was approved.
“This is not even funny. The company will be unable to operate, and they are one of the biggest players in the Greek market,” he told Reuters. “How will they keep open and keep their employees if they can’t produce?”
Although Athens is due to start negotiations over a third bailout package worth up to 86 billion euros, doubts remain over whether the agreement can be concluded and whether Greece will manage to meet the tough conditions attached.
Alarmed by the uncertainty facing Greece and speculation that it could be forced out of the euro, many foreign suppliers of Greek companies have taken a hard line, scrapping their normal settlement periods and insisting on payment upfront as they assess their position.
Even well-established Greek businesses have experienced problems with suppliers more concerned about the overall situation of the country than about the position of individual clients.
“Many of them, which have been paid normally within 60-90 day in the past, have started asking for advance payments since capital controls started,” said Vasiliki Mourafeti, purchasing manager for Pitsos, Greece’s largest producer and importer of electronic devices.
“We import screws, chemicals, plastics, metal sheets, handles and electronics for our production. Suppliers that send us materials every two weeks have told us that Greece is bankrupt and they weren’t willing to deliver any more unless payment was in full and in advance,” she said.
For large companies with foreign connections like Pitsos, part of German consumer electronics group BSH, there are ways to settle bills using existing foreign accounts but the problem is also affecting domestic suppliers as well.
The tougher conditions have created shortages and backlogs right along the production and supply chain, with ripple effects that can pop up in sometimes unexpected ways, complicating life for business already dealing with severe economic crisis.
Dimitris Koutroubas, head of procurement at Sidenor, the largest steel producer in Greece, said that foreign subsidiaries enabled it to smooth problems with paying suppliers outside Greece but everyday business had become much more complicated.
“Our current problem now is that we have some supplies that we pay for in cash against documents,” he said. “The materials have arrived at the port and they can’t pass through customs, as we have to give them documents that are at the bank, and the bank cannot provide us with the documents as they can’t pay.”
Many foreign suppliers are unwilling to comment on the record about the issue given the political issues surrounding the situation in Greece but it is clearly being watched closely.
“There is a lot of sensitivity around Greece and the way I read it right now, people aren’t yet fully sure that this is all in the clear,” said Till Dudler, Managing Director for Strategy, Consumer Goods and Services at consultants Accenture. “People are fairly risk-averse in this space and they’re going to see how it plays out.”
“My expectation would be that they’re managing inventory quite tightly,” he said.
Additional reporting by Martinne Geller in London and Dominique Vidalon in Paris; Writing by James Mackenzie; editing by Giles Elgood