ECONOMY

A tranquil oasis, not a greenhouse of growth

The true picture of the economy is rarely revealed by the main and established statistical indicators. The growth rate of Greece’s gross domestic product (GDP) in 2002, for instance, was 4 percent. The real picture, however, was different: The Greek economy is not the oasis of growth in the European Union that the figure suggests. A study recently released by business research company ICAP shows that the formation of new companies is on the wane and that those that are being set up are small and weak. Moreover, although the number of companies which merged was up in relation to 2001, overall merger activity remained low. The companies set up in 2002 were not only fewer than the year before, they were also smaller, as their average capital fell from 290,000 euros to 202,000 euros. And the total capital of new companies declined 35 percent, from 1.4 billion euros in 2001 to 940 million euros in 2002. This decline is a development worthy of serious attention: If the founding of new companies is on the whole considered a less attractive proposition, the problem is evident. There can be no economy with high and continuous growth that does not attract entrepreneurial capital. To be sure, the smaller total capital is not just due to the smaller number of new firms. We saw a complete absence of new large companies. No firm with capital of more than 100 million euros was set up, and of the 10 new companies with the greatest amounts of capital, six were the result of mergers or acquisitions of branches. In terms of sectors, 17 percent of capital for new firms went into hotels, 13 percent into construction and engineering, 6.7 percent into property leasing and 3.3 percent into foodstuffs. In 2002, there was no new large company set up either in energy, telecommunications nor even in construction. As regards geographical distribution, most new firms and capital went to the regions of Attica and Central Macedonia, where most of the country’s manufacturing activity is already based. On the other hand, the number of companies dissolved rose but also remained low; from 545 in 2001, they rose to 587 in 2002. About one in 10 firms established annually are dissolved within five years. Overall, it would seem that the Greek economy is not any greenhouse of fast growth in Europe but is a relative oasis for those enterprises that survive, as they do not seem much threatened by competition from newcomers.