By Yiannis Papadoyiannis
Banks expect 2014 to bring sweeping changes to the corporate map of Greece, as the reduced cash flow and the exhaustion of the fat created in the growth years mean that lenders and enterprises will have to make radical decisions.
According to estimates by senior bank officials, about 45 percent of the enterprises operating in the country today are plagued by such great problems that they have no genuine hope of recovery. The officials add that the termination of those businesses, through the process of bankruptcy and resolution, is inevitable.
Another 30 percent of companies may be facing serious issues but it is believed that they will be able to finally stand on their own feet and emerge stronger from the crisis through combined interventions such increasing their own funds, along with mergers, loan reductions and other moves. The remaining 25 percent is the robust section of Greek business, consisting of companies with high productivity, an export-oriented character and rational management, which are the main hope for the country’s corporate future.
Earlier this week, Bank of Greece Governor Giorgos Provopoulos called on banks to channel liquidity to healthy companies only, adding that it is pointless and dangerous to allow permanently weak and overindebted enterprises to continue operating. Bank officials told Kathimerini that keeping unhealthy companies alive on mechanical support – by issuing them loans they do not deserve – not only secures no benefits for the economy but is also damaging for the healthy ones, thereby destroying the corporate fiber.
That 45 percent of moribund companies are not only overindebted; they are also characterized by their obsolete production structures and are active in markets or sectors where they cannot compete with their foreign rivals.
The big challenge for the country is the redemption of the 30 percent of enterprises that can be saved. They produce and are competitive enough, but have huge debts which date to the times of growth and may have made poor business decisions. A case in point is fish farming, with Greece being Europe’s leader in production that is mainly exported, but the sector’s companies are overindebted and struggling to survive.