Survey: #GReality – Business in Greece Under Capital Controls

Over half of the businesses in Greece are now facing a new and difficult economic reality, following the imposition of capital controls and restrictions on banking transactions in the country, according to a survey released on Monday by Endeavor Greece, the global non-profit organization supporting high-impact entrepreneurship.

The survey was conducted on a sample of 300 companies, from  13 to 17 July 2015.

According to the findings, 58% of the sample companies report significant impact on their operations caused by the limitations imposed to cross-border transactions, as many of these companies cannot import raw material or have access to foreign services and infrastructure. Significant impediments were also created by the cap imposed on daily cash withdrawals but to a smaller scale.

Due to the capital controls, 69% of the sample companies have suffered a significant drop in turnover, while 18% report a drop in turnover larger than 50%. Only 4% of the sample companies reported an increase in their turnover and 27% reported no impact on sales.

It is worth mentioning that 70% of the respondents believe that capital controls will remain in place for more than 4 months, with 44% estimating that the duration will exceed 10 months. The majority of the sample companies expects a “haircut” on Greek deposits; 22% of them believe that it will exceed 25% of the deposit amount. On the other hand, 80% of the respondents believe that Greece will remain in the Eurozone in the next 2 years, while the vast majority (97%) wishes this will be the case.

A large of the sample companies that expect a possible “haircut” on deposits, have proceeded with settlement of all outstanding payments to suppliers (40%) and provided advance payments of salaries (46%), in order to reduce their cash positions. Fewer respondents report salary cuts and personnel layoffs as measures taken to address their liquidity constraints and approximately 1/3 of the sample companies has cut non-payroll expenses, such as marketing. Lastly, 23% of the sample Greek companies plan to transfer their headquarters abroad for security, cash flow and stability reasons.

The companies have taken drastic measures to mitigate the risks in their operations caused by the bank holiday. A large number has postponed payments to suppliers (45%) and in fewer cases they delay payments of salaries. Many companies (46%) use their current accounts opened with foreign banks to settle their trade transactions. Few companies (15%) performed sales in cash only, while 11% of the companies had to decrease or suspend production due to raw material shortages.

The respondents believe that the government’s key priorities in the short term should be to lift capital controls and increase access to liquidity for businesses and households. In the long run, tax evasion should be addressed as a top priority, while reforms in the labor market and the pension system should be implemented and bureaucracy should be decreased.