Textiles in dire straits

Negotiations in search of a final solution to the financial problems faced by the subsidiary of the Lanaras Group (Klonatex Holdings), Naoussa Spinning Mills, are expected to commence early next week, after the return from New York of Takis Arapoglou, the president of the National Bank of Greece – a major lender to the enterprise. At a tripartite meeting yesterday chaired by Panos Panayiotopoulos, labor and social security minister, participants discussed measures for job protection at the company. At the moment, employees of Naoussa Spinning Mills are on compulsory leave. Panayiotopoulos expressed optimism that problems will be solved, although he insisted that the final decision will have to be made by the five lender banks, petitioned by the Lanaras Group to issue bond loans. They include the National Bank of Greece, Emporiki, the Agricultural Bank of Greece, Alpha Bank and EFG Eurobank. The banks are thought to be willing to refinance the group to the sum of 20 million euros, as long as its major shareholder, Thomas Lanaras, agrees to inject it with another 10 million euros. They also insist that the new funds will be managed by an auditor. Lanaras, CEO of Klonatex, who participated in the meeting, held the banks responsible for the liquidity problems faced by the group, saying they had reduced financing for Naoussa Spinning Mills from 190 million euros to 130 million last year. He asked that a new, 38-million-euro loan be made available, along with the funds equal to the reduction in the originally approved credit. After the meeting, Lanaras expressed hope that the government will succeed in presenting to Brussels the competitive disadvantages of the Greek textile industry, which, he claimed, employs half a million Greeks. Klonatex Holdings, consisting of textile firms Naoussa Spinning Mills (NSM), Fanco and Gallop, and alternative telecom services provider Lan-Net, employs about 3,800 people and, according to Lanaras, has more equity than debt. Panayiotopoulos noted that «some sectors of the economy are at a turning point, as they now face the consequences of their lack of competitiveness as well as of increasing imports, from countries such as China.» He also noted that OAED, the government’s manpower management agency, is currently registering NSM employees in order to provide for special measures if necessary. Christos Trempelis, the president of the labor center of the town of Naoussa in northern Greece, warned of further action in order to safeguard all jobs if a solution is not found soon. Gerasimos Giakoumatos, deputy labor minister, met earlier with representatives of the employees of ELLATEX, a synthetic fiber producing company, which is also facing financial problems. They will be discussed at a tripartite meeting on Wednesday. Alpha Bank report The unfavorable financial situation of NSM, one of the Greek textile sector’s biggest concerns, is indicative of the problems that are the direct result of «the high increase in labor costs in recent years,» according to Alpha Bank’s latest weekly bulletin of economic developments. The report estimates that Greek labor costs have risen at much higher rates than in the rest of the European Union, and represent about 25-30 percent of the cost of the final products. The analysts note that the production of the Greek textile industry fell 2.5 percent in 2003, 7.4 percent in 2002 and 6.7 percent in 2001, while the decline in the January-May period this year was 6.4 percent. An estimated 30,000 jobs have been lost in the last eight years, as a large number of firms have transferred activities to lower-cost countries. The prospect of a further liberalization of European textile imports from countries such as China and India and the higher value of the euro make it imperative, according to the bulletin, for enterprises to intensify efforts toward adapting to the new realities rather than advocating a return to protective measures, which are no longer conceivable or feasible.