BUSINESS

Greece, a two-tier business landscape

DESPINA KONTI

TAGS: Economy

Greek businesses fall into two distinct tiers, according to a new report by National Bank of Greece.

The profits and capital returns of large and medium-sized enterprises active in Greece appear to have bounced back to pre-crisis levels, while small businesses have failed to keep up, trailing their European peers by 45 percent in terms of operating profits and 15 percent in capital returns, so that their return on assets (ROA) ratio is 60 percent below the European average, compared to -25 percent before this decade’s financial crisis.

On the other hand, the ROA rate among medium-sized and large companies – i.e. those employing more than 10 people – has returned to a level very close to the European average.

This has created the impression of a two-tier business sector in Greece, and the study notes that the gap between them means it is absolutely crucial to restructure, merge and streamline the corporate fabric. Therefore, apart from international developments, the recovery of the Greek economy will depend to a great extent on the financial health of local enterprises.

Another parameter that according to the study will determine the economy’s recovery momentum is the continuation of reform efforts aimed at improving the competitiveness of the economy and attracting new investments.

According to the WEF Global Competitiveness and WB Doing Business indexes, among others, Greece is showing a visible improvement in terms of competitiveness and business environment, but its institutional shortfall compared to the rest of Europe remains considerable. This is because Greece has major deficits in managing legal, judiciary and institutional issues in government policy, innovation and cooperation among enterprises and between the business and academic sectors.

Therefore, the study adds, reforms ought to focus on legal and judicial gaps (related to key domains such as land usage and bankruptcies), the quality of policy execution and innovation, as well as tackling the distance between the corporate and academic levels.

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