ECONOMY

Debate over bankruptcies is misleading

The past few days have been among the few times the main issues in Greek and international economic news coincided, with public opinion both here and abroad concerned about unemployment. There was widespread anguish, at least in Europe, over job losses due to enterprises shutting down. In Greece, the government rushed to accuse the businessmen of being unable to keep their businesses operating. And, since we already seem to be in pre-election mode, the opposition rushed to paint a picture of an economy on the verge of collapse, the exclusive work of the government (who else?). As usual, neither of these positions paint the whole picture. What we can say, however, is that there is cause for reflection – and worry. Until the end of 2002, the number of businesses going bankrupt was fairly small, certainly smaller in comparison with the other European Union member states. But when this «achievement» took place in a country with one of the most rigid economies in Europe, an alternative reading is required. The low number of bankruptcies might be not the result of corporate robustness, but a sign of immobility. During the past four years, the number of new companies has considerably exceeded the number of those that shut down. During 2002, for example, 112,583 firms were founded, while 66,332 went under. This is not a disastrous picture. The real question would be to focus on quality. What kind of companies are these new ones? Most are small-service businesses – cafes, bars and restaurants. On the other hand, the businesses that close are, for the most part, «traditional» companies that did not adapt to modern times. It is not certain at all that the new companies will be able to withstand present and future competition. What the Greek economy really needs is to improve its competitiveness, something that cannot be done without foreign capital.