Capital markets should not be ignored


Antonis Zairis is the CEO of the Hellenic Retail Business Association. He talked exclusively to GRReporter about the real business problems caused by the economic crisis and the weak points of the recovery program. He is certain that there is an urgent need to recover and reduce the public sector, cut spending and reduce the tax burden on companies and individuals at the same time. This will attract new investment and open new business opportunities. Otherwise, Greece will sink into even deeper recession, high unemployment and an inevitable collapse. Zairis calls on the government not to delay the structural reforms, because the forces of local merchants and entrepreneurs are running low. If the government is willing to raise additional revenue from somewhere, it should be through managing tax evasion not through imposing higher taxes and excise duties.


How did the economic crisis affect your sector?


The average decrease in the total turnover of the Greek trade is about 22%. Retail generates about 18% of the total employment in the country or around 780,000 people earn their living in this sector. Currently, local trade is experiencing one of the worst moments in recent decades, although it is of great importance for the local economy. This is shown by job losses in the sector, which reached about 150,000 in the last three years. Only during the 2010-2011, lost jobs reached 40,000. If we are to measure the crisis in closed shops, then we should consider that the total number of registered companies in the sector in 2009 was 320,000. In August 2011, about 70 thousand of them closed. This means that one in four retailers is out of business due to the development of the Greek economy.


Problems in Greece are extremely serious and the perspectives in the near future are not promising. How do you assess the development of retail trade under these conditions?


The main problems of the Greek economy come from the failure of the state budget and the delays in revenue collection due to the new higher taxes imposed recently. The economy operates very differently and it is not mathematics. In mathematics, two plus two makes four. Many other factors such as social, psychological and other go along with the economic measures. There are many negative sentiments in the market at this point and about 50 per cent are due to the negative attitude of consumers and companies. It is very difficult to work in this environment and it is the government’s responsibility to change it, to manage to change its course.


There are real problems, such as the reduced purchasing power of consumers, due to the lack of market liquidity and higher tax liabilities following the recent changes. The commercial enterprises, in turn, are unable to realize the planned sales and as a result, the state is not able to collect the planned revenue from taxes on business. Moreover, there are many companies unable to bring alone the necessary funds to cover the new higher taxes. The result is a serious problem with budget revenues.


What should be done in this situation to improve the business environment?


Immediate steps should be taken to cut the large public sector in Greece, which is one of the major problems today. In this respect, we require revolutionary changes that have not been popular so far and to give priority to the measures related to reducing the budget deficit at the same time. This year, it should fall to about 8.5% of GDP instead of 7.5% of GDP as envisaged in the plan for economic recovery from the beginning of this year. The measures to be applied to reduce the budget deficit should be fair and the burden of reforms should be distributed properly.


What do you think were the most unjust measures that burdened the recovery process the most, which you consider wrong?


The measures relating to taxation were in the wrong direction, because at this point if we expect something to happen, it will come from entrepreneurship. The only chance to absorb the unemployed expected to come from the public sector is by opening new jobs in the private sector. This requires attracting new investments and creating incentives for new companies. Therefore, corporate taxation has to be reduced. Currently, it is extremely high and the total tax liability of a company exceeds 40%, which is extremely unattractive for any businessman. Lower taxes will make Greece more attractive to the business and more competitive compared with the countries in the region, including Bulgaria.


I think the government had some delays in the process of privatization, market liberalization and the release of structural funds from the National Development Framework. Due to the delay in the liberalization of occupations and restricted sectors, Greece is losing approximately € 4 billion per year. The development program avails funds that remain unused and they can be immediately circulated on the market. The rapid activation of all these measures, together with the reduction of the huge public sector, are the most important tasks.


The ultimate goal of all these efforts is to restore the confidence of capital markets in the Greek economy. I would like to emphasize that it is important not to be quite suspicious for the goals of the international markets. Because when suspicion prevails, you can not properly evaluate the information submitted.


Does this mean that the government policy towards capital markets is wrong?

I'm not saying that it is wrong. I am saying that capital markets should be demonized, so we can objectively evaluate the information that reaches us and make our strategy based on this information. This means that if we live with the markets we can not take them into account or ignore their attitudes. There is a problem with the evaluation of the Greek economy. Markets require concrete measures to give us the relevant positive evaluation. These measures are clear and we mentioned them above: to cut the public sector and its spending, to relate the changes in revenue with the fight against tax unfairness. This is the way to restore our positive image abroad. All this will lead to the production of primary budget surpluses.


Today, there are different scenarios for the default of Greece. What is your position on the issue?


Default is a very bad thing. We should be very careful when we speak of controlled default or uncontrolled one. I think in this situation the most important thing now is to implement the measures agreed on July 21, 2011 very carefully and decisively. This is the goal.


Maybe that is the goal, but as we see, it is a problem for Greece to achieve the set goals. There is always a delay or incomplete execution of tasks. How would Greek merchants and companies respond if the measures EU leaders agreed at the summit on July 21 are not applied and bring some form of default?


In this case, about 50% haircut of the debt could be applied which will lead to serious liquidity problems of banks, social security funds and the market opportunities available to consumers. The crisis will become even more complicated if the default is uncontrolled and then the financial system will be in a very difficult situation. It will lead to massive nationalization of banks and other difficulties. In this case, the banking system should inevitably be supported because it is the only tool to provide financing on the market.


Unfortunately, I would say that banks are victims of state in the case of Greece. There are no free money, no liquidity for the households and for the companies. Whatever stocks there were they are almost exhausted. The companies are about to exhaust every possible source of funding and savings accumulated in the past, so that reforms could not be delayed further.

Συνέντευξη του Αντώνη Ζαΐρη στο GR Reporter.