Difficult times ahead for small Greek businesses

A considerable number of Greek small and mid-sized manufacturing enterprises will face serious difficulties in 2002. Business executives take the view that price competition, which is expected to intensify, coupled with the inability of many firms to boost their turnover or turn to new products, will cause them acute problems of survival, forcing many either to close down or be bought out. The first significant factor projected to bring about spectacular changes in the field of competition is the introduction of the euro itself on January 1. This, for a start, will make price differentials between Greece and the other members of the eurozone much more noticeable. Also, the accounting systems of enterprises, quality specifications and consumer protection systems will soon operate according to uniform European standards. The unification of the European market, it seems, is coming much faster than many Greek businessmen imagined. Characteristically, the majority of enterprises in several sectors are reported to be operating at almost zero profit margins in an effort to combat competition from the two or three largest domestic enterprises or imported goods. The only way out for the time being seems to be bank loans but this also has its limitations. Given this situation, the number of businesses can be reasonably expected to shrink considerably in 2002, or 2003 at the latest. The survivors are expected to be the larger and more sound enterprises which can still face competition with their superior pools of resources and market shares. A second important factor is the sign of fatigue which consumer demand is beginning to show, as recently displayed in falling purchasing orders and the reduced expectations in the business climate index of the Foundation for Economic and Industrial Research (IOBE). Particularly in the middle and higher income brackets there is consumer saturation, with simultaneous bottlenecks in production and demand in the market. Demand for the same products in great quantities, no matter how their brands or packaging may change, cannot continue growing at high rates, be it in categories of foodstuffs or appliances and clothing. A third important factor is the inability of many managers – particularly those in businesses which remain in family hands – to adapt to the new realities, restructure their businesses and introduce new technologies which will help in restructuring the product-mix and boost productivity. Bank of Greece Governor Lucas Papademos recently put emphasis on this problem. There is a broad consensus of opinion in the market that even the number of listed companies will shrink, let alone that of family run businesses. The partners said their strategic alliance will boost [their] leading position in the Greek bancassurance market.