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The Struggle Continues For Greece’s SMEs

Last week, PYMNTS explored how Greece’s ongoing debt crisis has at least one upside: The saga is demonstrating the resilience of the electronic payments system, running uninterrupted in the nation while limits cap how much cash one can take out of an ATM and while banks are closed.

But make no mistake — the Greek debt crisis is no picnic, especially for the nation’s small businesses.

On Sunday (July 5), Greece voted against earlier-proposed remedies by international lenders in the form of a bailout. Greek Finance Minister Yanis Varoufakis even vowed to resign from his post if the nation voted in favor of the measures. The vote has several potential implications — including a complete departure from the euro — but for SMEs, the current climate is especially unnerving now that an immediate resolution to the debt crisis is out of reach.

For SMEs in Greece, for example, every day is Sunday as the banks have remained closed (and aren’t expected to open until Tuesday), and business owners cannot access their bank accounts.

Reports from Reuters on Friday (July 3), two days before Sunday’s referendum on the bailout, featured the National Confederation of Hellenic Commerce’s sentiment on the situation. According to the head of the business lobby group, Vassilis Korkidis, this week: “The problems will multiply.”

SMEs, he said, cannot access e-banking services for their imports. They are forced to pay up-front for supplies, and if they cannot, their products remain in limbo in customs because they cannot pay import taxes. SME importers cannot strike deals to hire fleet trucks to transport goods into the nation.

For exporting SMEs, business owners are unable to obtain credit guarantees from institutional lenders, Korkidis added.

Even if SMEs had the money to continue cross-border trade, they cannot access funds stuck in the banks that are closed until at least Tuesday (July 7). And with consumers forced to limit their spending (caps have been imposed that allow customers to withdraw just €60 a day per card), there is no income for small businesses. Rumors have emerged that the cap will be reduced to as little as €20 a day.

Small businesses are forced to a standstill, and that’s bad news for an already crippled economy that depends on its small businesses to keep the market afloat. According to reports, Greek SMEs make up 86 percent of the nation’s jobs — a crucial figure considering about 25 percent of the workforce is unemployed. More than half of small and medium-sized businesses are said to be behind on salary payments.

Small business owners cannot access outside funds, either. “Without basic confidence in the banking sector, without a basic sense of where Greece will stand in two months, you don’t invest, you don’t borrow, you don’t buy,” said the founder of the European Stability Initiative think-tank Gerald Knaus to Reuters. Indeed, borrowing costs in the nation are at their highest levels in years, Bloomberg reported last March.

But a recent breakdown of what led Greece to its current predicament, “The Story of the Greek Debt Crisis in 20 Charts” by Thanasis Delistathis, revealed that the nation’s shadow economy is largely populated by microbusinesses. While those small operations may provide employment and salaries, they pay wages under the table.

According to Delistathis, Greece has the largest percentage of its economy in the shadows compared with the rest of Europe, with 22.4 percent of its economy relative to GDP considered to be underground.

While 99.9 percent of Greece’s businesses are SMEs, employing 86 percent of the workforce (compared to the EU as a whole, whose SMEs hire 67 percent of the workforce), rising tax rates give microbusinesses less incentive to conduct their transactions on the books. More than 96 percent of Greece’s laborers, reports found, work for micro-SMEs.

The political climate has created a brutal market for entrepreneurs, analysts agree. While SMEs are vital to Greece’s economic health, the debt crisis has been particularly rough on small businesses, who face rising taxes and expensive financing amid a lack of consumer spending. With Sunday’s vote, Greece may be closer to a solution to its debt crisis. But for small businesses, their future is still in doubt — and it may be so for a while.

“Today we celebrate the victory of democracy,” said Greek Prime Minister Alexis Tsipras following reports that voters had rejected the bailout proposal. “But tomorrow all together we continue and complete a national effort for exiting this crisis.”

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