The economy is trapped in a vicious circle as banks halt the flow of credit to businesses and households due to their liquidity problems. At the same time, a number of lenders are upping interest rates on business loans, leading to a doubling of funding costs, which in some cases has resulted in credit asphyxiation for enterprises. Businesses and self-employed professionals warn that the consequences are likely to be felt after the summer, weighing on the shrinking economy. An informal freeze on payments from government departments to businesses, falling consumption, a lack of experience in crisis management, a freeze on credit flow and higher interest rates are all combining to threaten the survival of hundreds of businesses. Corporate sources told Kathimerini that one bank has doubled the interest rate charged on working capital from 3.5 to 7 percent, threatening the business that it will otherwise cut off the credit supply provided immediately. Hundreds of firms are unable to raise capital or maintain existing credit lines. A number of chambers of commerce across the country have been informed by their members of the difficulties experienced in the downturn in conditions made worse by poor credit flow. Before the crisis, the spread banks offered on business loans ranged from 0.5 to 2 percent. Today it has reached 3.5-4.5 percent for existing creditworthy clients. For new customers, banks are taking a tough stance on determining the spread, which could even reach 8 percent. Participants in the trade, manufacturing and construction sectors have been hardest hit by the crisis and problems in the banking industry. However, the loan freeze stemming from Greece’s fiscal crisis has led many lenders to completely cut off credit, even to companies which display healthy growth prospects. Sectors such as shipping are underfinanced despite the increasing number of forecasts that are showing a faster rebound in the global economy. The credit squeeze is holding back new business initiatives and limiting the chances of survival for existing enterprises in policy decisions that will deepen the depth of the current recession. Today, banks’ priorities lie in maintaining their liquidity and managing loan portfolios in order to protect their balance sheets and avoid harming their capital position.