Sharks circling cheap money
No money is cheaper than the taxpayers’ money filling state coffers, as illustrated by the programs of the Development Bank for loans with subsidized interest (Entrepreneurship Fund II) or state collateral (Guarantee Fund).
Politicians are apparently putting pressure on bankers to issue credit to enterprises that do not fulfill the conditions. Meanwhile, banks jostle to promote client’s demand even with insufficient data, blocking the liquidity supply process. There are even cases of enterprises that have for years declared zero turnover but are suddenly seeking a share from the money coming in from taxpayers.
It is a phenomenon as dangerous as Covid-19 and almost as old as the Greek state itself, and it reemerged with the pandemic, testing the strength of companies and banks but also the credibility of the political system.
This feeding frenzy appears to have been triggered by the launch of the Entrepreneurship Fund for supplying business hurt by the coronavirus lockdown with loans whose interest is subsidized by the state for two years. The offer of “free cash” motivated not only businesses seeking to plug holes caused by the freeze of economic activity, but also companies that were considered “zombies” long before the health crisis.
Notably, demands for loans submitted under the Entrepreneurship and Guarantee schemes already add up to over 28 billion euros, while bank estimates say the liquidity deficit in the economy is about €10 billion. It is no coincidence that in their effort to collect as much money as possible, several enterprises submitted loan applications not just to one or two banks, but to three or four, and in some cases even more, thus delaying applications by companies that genuinely needed support.
The excessive demand meant that not all applications could be satisfied, triggering a wave of telephone calls by government officials and various politicians; most of which concerned businesses queuing up for a loan without having any realistic chances of getting it.