Businesses feel the cash squeeze
As the Greek economy slows under the weight of the crisis, data released yesterday showed a deceleration in lending to the private sector and a growing cash problem putting the squeeze on businesses. Tiresias, a nonprofit group jointly owned by Greek banks that provides credit profiles and other payment information, said the amount of bad checks in February shot up by 230 percent, in comparison with the same period a year earlier, to reach 222 million euros. There was also a sharp increase in the number of bad checks being passed around to 43,736, representing an annual increase of 254 percent. Businesses have been complaining that banks have turned off the lending tap, making finance subject to the fulfillment of extremely tough criteria. Lenders have replied that they continue to pump money into the economy and point instead to slowing credit expansion to households and businesses which appear reluctant to take on new debt during the downturn. Meanwhile, provisional data released by the Bank of Greece yesterday showed that the country’s total credit expansion accelerated to an annual rate of 14.4 percent in January from 13.9 percent in December. But credit to businesses and households slowed to an annual rate of 15.1 percent from 16.4 percent in December. »The small uptick in year-on-year credit growth, relative to December, is mainly due to higher public sector borrowing,» Platon Monokroussos, economist at EFG Eurobank, told Reuters. »Credit to business and households decelerated in January and a further decline in the rate of growth in this segment is expected in the months ahead, despite the relative stabilization in money market conditions compared to the October-November period.» Government officials are hoping to keep the pace of lending above 10 percent this year in order to help the economy achieve a growth rate of just over 1 percent in 2009.
