Uncertainty, cash crunch keep entrepreneurship in stagnation

The dominant feature of the Greek business sector in recent months has been stagnation, even in cases classified as entrepreneurship of necessity. The trend that started in fall 2014 strengthened in the first quarter of 2015, resulting in a 21.8 percent year-on-year drop in the creation of new enterprises in January-March, according to the General Commercial Register.

Corporate professionals offer two main reasons for this rapid decline: The first is the prolonged economic uncertainty and the second is the ever deteriorating liquidity conditions, both of which stifle investment. This is more so for small and medium-sized enterprises, and especially personal companies – many of which were founded for lack of any other employment.

The register’s data show that there were 9,801 new enterprises of all legal forms (including those with a minimum starting capital) in the first quarter of the year, against 12,562 in the same period last year and 12,942 two years earlier. Even 2012, a year of intense political and economic uncertainty, saw the emergence of more new enterprises than this year, totaling 11,495.

A far greater rate of decline was recorded in the rate of new companies formed to employ a higher number of people (known as SA or Ltd). The latter showed a 47.68 percent year-on-year drop, numbering just 156 against 252 new firms set up in the first quarter of 2014. The fact that even the number of new private capital companies (PCCs) – known as one-euro enterprises – is also dropping shows that the bigger companies that close are not turning into PCCs, as they used to until recently, but are shutting down for good.

Corporate shutdowns showed a significant slowdown in the first quarter, numbering 5,487 against 8,604 in the same period last year. By the end of June 2015 the number will not exceed an estimated 8,500 exits from the register. However the market does not attribute it to any improvement in sentiment, but rather to the fact that the catharsis of the country’s business map is nearing its completion. “Those that were going to close have closed,” is the word in the market.

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