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Greek Economy Shows Grass Roots Rally But Remains Clearly Fragile

Even amid the wider financial chaos of Europe, Greece has stood out as a particular basket case, lurching from crisis to crisis and from bailout to bail out, but is the long-term sick man of the EU at last showing some sure signs of recovery?

Photo: Athens: Riot bound or bound for recovery?
Athens: Riot bound or bound for recovery?
Photo: Athens: Riot bound or bound for recovery?
Athens: Riot bound or bound for recovery?

The last six years have been a bruising time for Greece. GDP has dropped by almost a third, while more than a quarter of the workforce now unemployed, with nearly half of those aged under 24 without a job. Wages have simply fallen off a cliff, dropping to levels not seen since the last century.

The pervading impression has been one of continual crisis – the seemingly endless stream of elections and emergency budgets, referendums and riots painting a picture of a country on the verge of collapse. The all-too-frequent Mexican stand-offs with its international creditors – the so-called troika of the IMF, European Central Bank and European Union – over the billions Greece needs to borrow to prop itself up haven't helped either.

The casual visitor to Athens, however, might – if he or she had not been paying too much attention to the international news – be somewhat bemused to be told this was the epicentre of an economic calamity. The city looks and feels like any other normal well-to-do European capital. The shops are busy. Public transport runs smoothly. There are – contrary to popular impression – no queues of forlorn deposit-holders at the ATMs, all desperate to extract their euros before the banks run out of cash.

The Plata Syntagma – the huge square in the centre of Athens that has become synonymous with violent demonstrations – is now largely peaceful, populated mainly by tourists gawping at the weirdly dressed soldiers of the presidential guard, all goose-stepping in front of the national parliament building.

In fact, there has been just one mass protest since left-wing Prime Minister Alex Tsipras was returned to power in September. That was largely orchestrated by his own Syriza party as a means of sending a message to the troika during the debt renegotiations. It's almost as if the horrors of the last half-decade have exhausted the ability of the citizens of this ancient metropolis to rebel any further.

Or it may be that Greece's story is, instead, quietly being told elsewhere. You don't have to travel too far from the Plata Syntagma to find a prosperity markedly at odds with the prevailing narrative. In places like Alimos, for example – a well-off coastal suburb south of the capital, replete with beach clubs, marinas and modern apartment complexes overlooking the sea.

At first glance, it seems clear that it has suffered along with the rest of the country. Several ambitious construction projects appear to have been abandoned altogether, leaving behind just piles of rusty scaffolding on boarded-off building sites. Its chic waterfront bars, however, are still doing a roaring trade, while the marinas still play host to a plethora of yachts. Most encouraging of all, a host of new small businesses are beginning to sprout.

These are businesses like Emagie, a restaurant opened recently by two Alimos residents – Michael Kontouris and Ted Angelinos. Aimed at locals rather than the tourist market, this is in itself a sign of some confidence in the future of the Greek economy.

Kontouris, a chef by trade, agrees that things are slowly getting better. He says: "People are starting to eat out again. Not every night, maybe just once a week. Because of the economy, though, they want low prices, simple Greek food. Before they wanted sushi. Now they want to go back to their roots, the sort of food they'd eat at home."

Photo: Plata Syntagma: Currently confrontation free.
Plata Syntagma: Currently confrontation free.
Photo: Plata Syntagma: Currently confrontation free.
Plata Syntagma: Currently confrontation free.
Photo: An Athens’ ATM: Bereft of cashless crowds.
An Athens' ATM: Bereft of cashless crowds.
Photo: An Athens’ ATM: Bereft of cashless crowds.
An Athens' ATM: Bereft of cashless crowds.

The tables are packed, the atmosphere is lively and everything seems to be going well, at least so far. These are early days, though, and Kontouris is taking nothing for granted. He warns: "We can't afford to hire anyone yet, so we do everything ourselves. I am working in the kitchen from morning to midnight."

An uncertain foundation for recovery perhaps, but there are some signs that, for the economy as a whole, a corner may finally have been turned. Although Greece's GDP growth continues to flatline, unemployment – while still high at 24.61% – has quietly dropped to levels of three years ago. The average wage level, too, has recently registered a slight up-tick, bringing to an end its spectacular fall.

Business confidence may be returning, too, after reaching its lowest level in the autumn. The country's Business Climate Indicator is running at its highest level since 2013 – and even the optimism of the country's consumers, hit hard by events of the last few years, has shown signs of a small recovery.

That confidence may, in the short-term, be somewhat misplaced. In fact, 2016 is forecast to be another difficult year for the Greek economy with growth dipping once more and the prospect of further deflation hindering any recovery. If the forecasters are to be believed, however, the medium-term picture is more rosy – with annual growth rates of 1-2% achievable in a couple of years' time. Nothing to brag about perhaps, but for Greece, it would represent a hugely significant turnaround.

If that optimistic picture is to stand any chance of becoming reality, the country's creditors must be kept on board. To keep the troika happy, there must be no more missed loan repayments, and the public deficit must be kept under control – and that means boosting government revenue by, among other things, a concerted attack on tax fraud.

In Alimos, this appears to be already underway. Local lawyer Chris Karakoulakis, for example, may be one of the early beneficiaries. He says: "Most of my work used to be in property deals, but there's not much work in that sector now. Now most of my cases involve cracking down on tax evasion."

Ironically, it's likely that many of the cases Karakoulakis is working on will involve self-employed middle-class professionals, those similar to himself. Contrary to the popular view on tax evasion, which assumes that it is largely the preserve of big companies and small builders, in Greece it is the accountants, lawyers and doctors who tend to pay less than they should.

An indicator of this is a recent survey which suggested that people in those professions were actually paying more than 100% of their declared income in consumer loan repayments. Or, in other words, their reported (ie taxable) income was significantly below their actual income.

This may make tax fraud significantly harder to crack down upon. Indeed, the government may have to fall back on finding new ways of taxing its population in order to try to satisfy the auditors and reduce the public debt.

And that's a worry for the owners of places such as Emagie and the other fledgling businesses now trying to establish themselves. For Kontouris, what concerns him most is the uncertainty. He says: "We are still very worried about the future. Everything is still up in the air. Tomorrow you could wake up, there could be even more taxes, who knows? No-one can make an estimate on the future of their business – their costs or their profit."

Photo: Can small businesses and tourism rescue the Greek economy?
Can small businesses and tourism rescue the Greek economy?
Photo: Can small businesses and tourism rescue the Greek economy?
Can small businesses and tourism rescue the Greek economy?

It's a concern that Alex Tsipras's administration would do well to try to address. The small business sector is immensely important to Greece, with its huge reliance on tourism and the service sector. It's no coincidence that the number of new business start-ups in Greece declined by a devastating 45% between 2008 and 2012.

If Greece is to haul itself up out of recession, the renaissance of this sector of the economy will need to be one of the driving forces. The country needs businesses like Emagie to succeed. If the government can steer a careful path between raising more revenue and allowing Michael Kontouris the freedom to prosper, that might just be possible.

Robert Rea, Special Correspondent, Athens

Content provided by Picture: HKTDC Research
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