OPINION

Signs of recession

The recent wave of bankruptcies involving relatively well-known firms has raised serious concerns that the phenomenon may foreshadow broader economic turmoil. What is even more alarming is that the closures are not limited to the capital-intensive sectors, such as clothing, which have been forced under the pressure of global competition to shift their production lines to Third World states or to «Europe’s Third World,» meaning the central and eastern European states that still offer low-cost labor. Moreover, the economic crisis has also hit high-turnover and high-profit sectors like cosmetics, food, private education and beauty centers. On top of the recent closures of a well-known cosmetics chain and a small supermarket chain, a private education institute, which employs more than 1,500 people, is said to be teetering on the brink of bankruptcy. Should this occur, the crisis will deepen, as the biggest dried fruit and nuts franchise is also said to be about to follow suit. While avoiding any dramatic generalizations, one must note that the aforementioned firms have been problematic for years and their collapse is mainly the result of erroneous business decisions. This, however, should not prompt the conclusion that there is no imminent threat of more closures. Many other firms also face the specter of closure – particularly companies that were born out of the «irrational exuberance» caused by the stock market boom. These firms based their economic strategies on the climate of euphoria and excess that captivated hundreds of thousands of Greek citizens. The day that this huge bubble, which extends far beyond the listed companies, will burst lies not far in the future. The highly competitive environment will deadlock many of the businesses that are keen on moneygrubbing – a habit that took off thanks to the surrounding climate of corruption. Furthermore, the pressure on the incomes of middle-class employees and salaried workers, the State’s failure to introduce the structural reforms needed to boost the competitiveness of Greek firms and the national economy in general, as well as an excessive number of small businesses – these factors all paint a bleak economic picture. Whether the recession will help clean up the economy depends on government initiatives. And here the prospects are also rather grim.