Greek Economy In "Doomsday" Tailspin: 59 Businesses, 613 Jobs Lost Each Day, Suppliers Demand Cash Up Front

Tyler Durden's picture

While the Greek government has wasted the past 4 months experiment with game (and hope) theory-based negotiations with the Troika, debating what reforms it should implement, what the budget surplus should be, and how much of a pension and wage haircut the local workforce should undergo just to keep the trickle of European money flowing and "allow" the IMF to repay Greek IMF obligations and the ESM to repay the ECB, the Greek economy has slammed into a brick wall because according to Greece's retailers association, about 59 businesses close down and some 613 jobs are being lost each day.

Unfortunately, that number does not give justice to the total economic collapse that has happened in Greece over the past 5 years, just so the myth of the doomed "common currency" could be maintained one day at a time. 

It is not just the country's domestic businesses that are shuttering down at a dramatic pace: even projects once funded by the European Union, such as motorway construction and which served as a source of jobs for many local contractors, have been mothballed.

When construction of four 6.5 billion euro toll roads across Greece resumed last year, Greek and foreign businesses rejoiced. The motorways, largely funded by the European Union and built by companies including Germany's Hochtief, France's Vinci and Greek firms Ellaktor and GEK Terna, had been halted in 2010. Last year, work resumed after the Greek government paid part of a fine to contractors for the four-year delay.

 

Now, work has slowed once more. With aid from its bailout programme frozen, the government has used its last cash to pay public sector wages and pensions, and service debt. That has left it without 230 million euros it needs to contribute its part of the financing for the road.

 

The hole has put the entire project at risk again, one of many business ventures suffering amid the uncertainty of four months of negotiations between Athens and its international creditors.

"As a country, we need to move as quickly as possible to strike a deal that will resolve issues being faced by big and small (infrastructure) projects," says George Sirianos, head of the association for big Greek construction firms.

Reuters tells the story of Paul Arnaoutis, whose firm sells imported medical supplies to Greek hospitals, has been waiting four months to be paid 1.3 million euros the state owes, nearly as much as his company's entire 2014 sales of 1.7 million.

The Greek insolvency, which had been masked with European liquidity, is finally being appreciated by the vendor chain, and as a result, Arnaoutis' Chinese suppliers are now demanding cash up front because of the risk of doing business with Greece.  Previously they gave 30-60 day receivable terms. "He fears a doomsday scenario in which the government quits the euro and pays its bills with IOUs, which foreign suppliers will not accept."

"If there is no deal and the government decided to take Greece out of the euro, all Greek importers would be ruined."

 

Meanwhile, his company is expected to pay tax on 335,000 euros in reported profit from last year, even though it still hasn't received most of the money for the sales: "The profit is virtual".

Ironically, in the US the bulk of non-GAAP profit is also "virtual", however for the time being the generosity of capital markets allows money-losing US companies (if only on a GAAP basis) to fund themselves entirely courtesy of gullible investors who hope that any minute now, the cash flows will rain.

Unfortunately for Greece, it is now too late:

[E]ven if a deal is clinched and Greece survives as a euro zone member, many companies are so battered by the cancellation of contracts, delays in state payments and the steady outflow of bank deposits that they will struggle to make up for losses.

 

According to Greece's retailers association, about 59 businesses close down and some 613 jobs are being lost each day.

 

It says about 95 percent of businesses' applications for loans are being rejected by commercial banks. Many small and medium-sized firms have stopped even asking banks for credit.

All of this excludes an even more troubling development in the local banking system which, too, is on the verge of total collapse: as reported last Friday "Bank Run Surges "Massively" As Depositors Yank €700 Million Today Alone."

And with people's confidence in the banking system, the bedrock of every modern society, shaken, everything else follows:

Gaia Wines, which produces 350,000 bottles of wine a year and exports 65 percent to the United States, Britain and 22 other countries, was to begin selling in New Zealand in April, but the first client there cancelled its 4,000 euro order.

 

"Our wines are of good quality. But people get scared because of the turmoil. This is reasonable," says co-owner Leon Karatsalos.

 

The company has been waiting nearly a year for the government to respond to a request for access 150,000 euros in EU funds to renew equipment at one of its plants. The response was supposed to come by January but never came, says Karatsalos.

Unfortunately the government response, if it ever comes, will be too late to save Gaia if not the entire domestic economy which now, in morbid irony, lies in ruins in the country where soon the only remaining business will be showing off other, far more famous ruins to visiting tourists.

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Soul Glow's picture

Just leave the EU already!

kliguy38's picture

nahhhh.........its the PENSIONS.......its all about the PENSIONS

Soul Glow's picture

YV and Tsiparas are a joke.  They could have told the IMF to get lost initially.  I know the threat is they will be a banking paraiah but there are plenty of nation-states that would help them rebuild their economy.  Besides that they could have reissued the drachma and backed it with some silver.

They could have used the hundreds of millions of dollars they lost to the IMF over the last 4 months and bought up enough silver to substantially back their currency.  This not only would give them a sound currency but would have boosted price in silver due to supply/demand.  SHit, they might have even triggered a comex default and the drachma could have triple in value over night.

Their pensions would be paid and their finance sector would have boomed.

OH FUCKING WELL!

nemesis2012's picture

You seem to forget that Greece is in the control of the zionist leeches and have a tight grip in all areas of goverment. They will not give up Greece due to the huge oil reserves recently found. Tsipras is playing his role brilliantly as a puppet of the State dept...................

Wolferl's picture

Hail to the dear leader Alex Tsipras and the comrades of the central committee of Syriza for this great achievement. Shows you how brain dead the Greeks are when Syriza is still in the lead in polls.

 

Throw those pathetic Greeks out of Europe already.

0b1knob's picture

And yet they still have money for spray paint graffiti.   

Joebloinvestor's picture

They didn't "lose" those millions.

It was equivelent of a taking a cash advance on a credit card to pay the one that is due.

Pal's picture

Soul G

You re talking about...Greeks!  The last time the Greeks did anything right as defeating the Persians...The only reason that are even still relevant is because of geography.

 

Greece is working perfectly just like the Greeks always do. I don't understand why this is news.  The only reason the Greeks have any leverage to even be able to beg is because of the 700 lbs Spanish Gorilla patiently waiting his turn.  If the krauts cave to Greece then they will have to cave to the Spanish and the kraut public won't swallow that moneyshot.

Cangaroo.TNT's picture

The state is responsible for 1.3 of your 1.7 MM in revenue?  That's the problem in a nutshell. Get off of welfare already or stop calling yourself a business owner. 

centerline's picture

Reminds me of an old adage about doing business with thieves.  Hmmm....

Bangin7GramRocks's picture

Ever been within 50 miles of Washington D.C.? Same shit, but the revenues are in the billions.

nicxios's picture

Hey stupid, he sells medical supplies to hospitals. Most hospitals are public not private. 

Cangaroo.TNT's picture

Hey fucking moron, maybe in Greece but that's not my problem.  I own a construction company and we do maybe 5% pulic work, the rest private.  If you're going to be a glamorized welfare parasite don't blame anyone else when the host dies.  That was his choice.  And 335M profit on 1.7MM in revenue is cuting a pretty fat hog.  Boo fucking hoo.  And public or private he sold to an entity with no ability to pay.  Who exactly is the stupid one in this scenario?  Jag off.

nicxios's picture

Nobody cares what you do shithead. Nobody cares if you think its your problem or not. Poor guy is in the medical supply business not on welfare you stupid cunt. Sounds like you're happy someone else is getting fucked because your business is in the shitter.

doctor10's picture

Yep. A full-bore central bank national asset-stripping project is nothing to stand in the way of.

 

YV and tsiparas have been educated to that end by the bankers in Brussels.  The local guys facilitating an asset-stripping project make out pretty well.

css1971's picture

They can leave the EuroZone without leaving the EU. The EuroZone are those countries which use the Euro.

 

They could of course use the Euro and a local currency.

Ghordius's picture

Soul Glow: "Just leave the EU already!"

who? the UK? perhaps soon. Greece? nobody in Greece is talking about leaving the EU. The eurozone, perhaps, but not the EU

Jumbotron's picture

** ALERT **

Watch out ZeroHedge commenters.  The DOJ could be coming for you.

http://motherboard.vice.com/read/the-government-wants-names-of-online-co...

HolyfieldsOtherEar's picture

I thought all this doomsday stuff was going to happen IF Greece left the EU and fired up the drachma? Looks like they get it anyway. Nothing to lose but your chains, kids.

You're walking the plank anyway. Take somebody with you. Default. Disengage. Drachmatize.

NoDebt's picture

Nobody cares the state of the empire over which they rule, so long as they rule over it absolutely.

JustObserving's picture

What is happening in Greece is the fate of virtually every Western nation that borrowed too much.

US has debt and unfunded liabilities of $1,400,000 per taxpayer and rising at $70,000 per taxpayer per year mainly due to sky-high healthcare costs such as charging $800 for a $1 bag of saline water.

"Our country is broke. It's not broke in 75 years or 50 years or 25 years or 10 years. It's broke today," he told the Senate Budget Committee. "Indeed, it may well be in worse fiscal shape than any developed country, including Greece."

http://www.newsmax.com/Finance/StreetTalk/Kotlikoff-GDP-debt-deficit/201...

youngman's picture

unfortunatly we can print our own money...so we will go the way of Germany in the 20s first...before we reset...hyperinflation to the moon..

JustObserving's picture

We have massive inflation in the US already but it is papered over by fake economic statistics:

The Chapwood Index (real inflation)  for 2014 was 9.7% and official CPI in the land of the free was only 0.8%.  So real inflation was 1212.5% of the official number in 2014. And thus the nominal GDP of 5.6% for 2014 becomes real GDP of -4.1%.

The revised real GDP for years 2011 to 2013 worked out to -6.2%, -6.5%, -6.5% respectively.

What is the Chapwood Index?

"The Chapwood Index reflects the true cost-of-living increase in America. Updated and released twice a year, it reports the unadjusted actual cost and price fluctuation of the top 500 items on which Americans spend their after-tax dollars in the 50 largest cities in the nation."

http://www.zerohedge.com/news/2015-05-29/inaccurate-statistics-and-threa...

 

The Delicate Genius's picture
The Delicate Genius (not verified) JustObserving Jun 10, 2015 10:03 AM

missed that one, great link, thanks for posting it.

nemesis2012's picture

 Great lookin eye-you want some visine for that?

Government needs you to pay taxes's picture

You know why US criminal politicians aren't bothered by that debt?  They know American citizens hold $80 trillion in assets.  We've been fed, we've been fattened, next comes the shearing, then the slaughter.  A 25% 'one-time' (wink, wink) wealth tax would net the Fedcoats $20 TRILLION dollars.

Problem solved, bitches.

What do you think FATCA is really about?  I think it's about making it difficult to hide the assets from the wealth tax. . .

sleigher's picture

I was thinking the 401(k)'s were the target.  I read there is about 19 Trillion in 401(k)'s?  That would get rid of the debt as the place collapses...

agent default's picture

So Greek socialism has run out of other people's money.  Looking forward to it in the US.

DogOfSinope's picture

Nope. It's crony capitalism that run out of Greek people's money.
Otherwise Greek people would be rich and Wall Street, City, Frankfurt and Zurich bankers would be poor.

dexter_morgan's picture

It's essentially collectivism/communism - has a 100% perfect failure record every time its tried.

DogOfSinope's picture

Nope, because Syriza didn't make Greek debt, PASOK and Nea Demokratia did - crony Greek politicians colluded with crony bankers and crony corporations. How do you think that money was spent? Building schools and kindergartens? Swiss-like wages to population? Nope. It went on buying Siemens trains and whatnot and of course cronies on all sides split the loot. No one asked Greek people about it nor did an average Greek person benefited from it. Actually, asking average Greeks to now foot the bill would be manifestation of socialism - the same kind of socialism like in the U.S. where plebs is footing the Wall Street bills.

crazytechnician's picture

crony capaitalism basically is a form of socilaism , once those banks got bailed in 2008 capitalism was lost. Under a true capitalist system the zombie banks would have all failed in 2008 and we would now likely be back in growth.

DogOfSinope's picture

No. Crony capitalism is crony capitalism.
I'm not defending socialism. It's shit, too. It's not even a system - it's a delusional ideology. But even in it's delusion it at least on paper has some ideals of social justice. On the othe,r side crony capitalism is just degenerate plutocracy - in essence no different than the pre-democracy antic Greece tyrannies or medieval despotic kingdoms and with no regards to anyone's wellbeing but plutocrats themselves.

MFL8240's picture

Coming to a theater near you!

q99x2's picture

Bitcoin last price: $229.96

Issue arrest warrants for Blankfein and Dimon. Without no justice there is no justice.

youngman's picture

Those 69 closings are just businesses that are no longer sending in taxes....they are still open..just under the table I bet...but they are lost to the government....and the old line if you dont pay...you get nothing....how that health company got that far in hock is his fault...you send anything to Greece now you are not getting paid....period

stormsailor's picture

drachma,drachma,drachma,...................default

JonNadler's picture

The result of Goldman doing God's work at its best

JenkinsLane's picture

Well done on that whole negotiation thing.

jmeyer's picture

Ditto to all comments

Counterpunch's picture
Counterpunch (not verified) Jun 10, 2015 9:39 AM

How much of the money Greece owes to banks... was created out of thin air?

 

Preaching to the choir, but its worth constantly reminding ourselves of the inherent, absurd injustice of stealing from the Greek people, and their labor, to pay back banks in blood, sweat, and tears what they loaned in ink.and paper.

 

Fuck the EU.

 

 

Boxed Merlot's picture

How much of the money Greece owes to banks... was created out of thin air?...

 

We all know the answer is somewhere in the neighborhood of 100%.  The problem's that it was initially spent as if none of it was.

 

The highest valued currency was / is that currency which can be exchanged without receipts, which is why the US cyphrage with all the reporting entanglements and needless recordkeeping and pseudo "enforcement" threats associated with any entity caught using the stuff is rapidly losing favor.

 

I suspect Brics will start being used for trade soon as long as no one has to report transactions to the issuing agency, preferably a soverign entity and not some "bankers without borders" ghost.

 

jmo and hope.

 

dag's picture

Who talks about the Greek thug government that put the country in this situation?

Each former Greek goverment, including the present one, should publicly executed.

 

Rothosen's picture

Does anyone else running an android tablet have problems with the sponsored ads popping up making the site virtually unreadable?

SpanishGoop's picture

You should use Apple products !

 

SpanishGoop's picture

Current score

Missing the /sarc 6 not missing it 1

youngman's picture

I have a desk top and it takes 30 seconds sometimes more to load a page....to many adds...and something called cross searching???

Shad_ow's picture

ghostery with firefox - no ads