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Jan 20, 2015
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In Greece, new crisis stunts green shoots of hope

Jan 20, 2015

ATHENS, Greece - Timos Tzannes, owner of high-end watch and accessories stores in Greece, had last year pencilled in a 25 percent rise in sales for the upcoming fiscal year. He had planned to distribute bonuses to staff for the first time since 2008.

Now renewed nervousness at home and abroad about Greece's upcoming elections this weekend has dampened demand, threatening to derail a nascent recovery in a battered economy.

The outlook of Greek businesses and consumers fell in December to its lowest level since April, according to data from a think-tank. Greece's main retail association estimated that sales fell 7 percent to 6.3 billion euros in December.

The sudden change in mood highlights how sensitive Greek businesses remain to their country's political situation.

As wages and prices have fallen in Greece after six years of economic crisis, companies have seen a slight uptick in demand and some firms have been able to seek new markets outside Greece and the euro zone. But the country remains a heavy importer, with companies catering largely to domestic clients.

"There was a general feeling that December would be a very good month," said Tzannes, as he walked past a glass case with 9,000-euro watches in one of his five Greek stores. "The first six or seven days were outstanding. But the rise vanished afterwards."

Greece's new bout of political uncertainty began in the second week of December when the government pushed forward a parliamentary vote to name a new president, triggering a set of events that led to early elections scheduled on Jan. 25.

"It was very unfortunate that the vote for president started in December, one of the most profitable months for retailers," said Dimitris Mardas, an economics professor at the University of Thessaloniki. "It was natural that people would hold back."


Part of the concern weighing on Greece is that Syriza is expected to win the election but may not be able to form a government alone, raising the threat of repeat elections that extend a period of political paralysis.

A Syriza-led government could push Greece off the path of reforms and austerity that are needed for bailout funds, raising the risk of a clash with European partners who could choke off financial aid.

There are already signs that the country risks a new crunch. General tax revenues slumped in December, according to Greek finance ministry officials. Now economists are beginning to re-evaluate forecasts for 2015, when Greece's government projects the economy will expand by 2.9 percent.

Nikos Magginas, an economist at National Bank, the country's biggest lender, estimates that Athens will miss that target even assuming a best-case scenario of a new government quickly taking power and concluding pending bailout discussions by March.

"If that's the case, the country's GDP growth would come in at about 2 percent for the whole year," said Magginas.

Eurobank economist Platon Monokrousos said his 2.5 percent growth forecast for the year was now at risk, noting that January and February will be critical for bookings for the tourist season on which Greece heavily relies.

A growing list of companies say they have begun to feel the pinch from political turbulence. Greece's biggest toy seller Jumbo reported a nearly 8 percent rise in mid-year sales to December but warned political instability in Greece was among factors that put a lid on the improvement it saw in the first quarter, when sales rose by 11 percent.

Sales at its Greek stores grew in the July-Sept period thanks to a good tourist season but the rise evaporated in the following three months to December, a company official said.

Thanοs Tsagaris, 60, who owns a franchise for Geox shoes along with nine clothing stores in Athens, is putting plans for new shops on hold until after the vote. Sales dropped 7 percent in the first ten months last year, and he was hoping for December to put him in the black for the year. Instead, the sales decline accelerated to an annual 20 percent drop after the government brought forward the presidential vote, he said.

"Rents are lower and we were trying to open two or three new stores," he said. "But now we will wait for the outcome of the Jan. 25 elections and how consumers behave."

Tzannes, who sells Montblanc watches and accessories, said sales slumped 78 percent between 2008 and 2014. He fired half of his workers and was forced to move its flagship Athens store a block away to slash expenses.

The firm, which was set up in 1940 by his father and two uncles, at its peak in 2008 employed 25 workers and saw sales hit 9 million euros. Today, the staff numbers 10. Sales, he says, will fall short of the hoped-for 25 percent rise to 2.5 million euros in the year to June 2015.

Like many Greeks, Tzannes reserves much of his scorn for politicians he says are driving the country into the ground.

"Greece cannot afford to lose time anymore and no party seems to have realised that," he said. "In six years, we had four different governments. Can a country make any progress under such circumstances?"

€1 = $1.16/£0.76


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