The Greek economy is changing – but not fast enough

Athens, Greece – When Iphigenia Zachou opened her café and bakery in Greece’s capital, she went through a bureaucratic wringer.

Renting a property and spending almost $40,000 of her own and her parents’ money on baking ovens was only the first step. She then had to upgrade the power line to take the load.

“It took a lot of paperwork and a month to get an appointment,” she told Al Jazeera in advance of Greece’s general election on Sunday. “Then an engineer told me the whole pavement had to be dug up because the wiring was all wrong.”

It was the engineer who turned out to be wrong, but the back-and-forth cost two months.

More time was sacrificed dealing with the culture ministry, which has to license all businesses within a certain radius of the Acropolis in central Athens.

“Why should it take the culture ministry six months so I could open a café here? It’s a 1960 apartment building. It’s not as though they’re going to find antiquities,” Zachou said.

Another two months were spent claiming a tax rebate, she added, “because one person had gone on holiday”.

In all, her brush with public services cost seven months and increased her startup costs by $7,000.

“You get to the point where you’re trying to open a business, you’re giving people work, you’re part of the tourism industry, and the [public sector] treats you like a criminal. They look at you as though you’re trying to cheat,” Zachou said. “There’s none of the support I hear from friends abroad to open a business. The best case scenario is indifference.”

Baptised in fire

Zachou, 33, came of age during Greece’s great recession.

Faced with the threat of bankruptcy, Greece was forced to borrow 256 billion euros from the International Monetary Fund and its eurozone partners in return for balancing its budget.

Greece managed that feat in just four years, but the recessionary effect of sudden austerity cost it more than a quarter of its gross domestic product (GDP), the steepest post-war drop in a developed economy. State revenues remained constant, as taxes were constantly adjusted to punish the dwindling population that could pay them.

Greece lost a quarter of a million small enterprises to bankruptcy and half a million workers to overseas job markets. Even behemoths like Viohalko, the country’s biggest industrial group, moved its headquarters abroad to lower their borrowing costs, because markets were factoring in their exposure to Greek taxes as a risk.

Prime Minister Kyriakos Mitsotakis, of the New Democracy party, came to power in 2019 pledging to bring back Greece’s lost children and boost entrepreneurship. Zachou’s experience is evidence that the conservatives still have a way to go in taming a bureaucratic and highly politicised state, where incompetence and absentee workers seem tolerated.

Occasionally political parties suffer the consequences. When a passenger train collided with a freight train on February 28, killing 57 mostly young people, Néa Dimokratía was forced to admit that the hapless stationmaster who put it on the wrong track was its own fast-track hire, done outside the usual evaluation process – essentially a party favour.

Most people find it difficult to imagine that the damage done to the economy over many decades of partisan behaviour by conservatives, socialists and left-wingers alike can be unravelled in one government term.

But New Democracy considers that it has at least tried. It came through on promises to lower taxes levied during the years of austerity. Business tax fell from 29 percent to 22 percent. Personal income tax fell from 22 percent to 9 percent. A “solidarity tax”, which added between two and five percentage points to income tax, was abolished as employment rose. Social security contributions fell by three points, and pensions rose for the first time in 12 years, by 8 percent. Minimum wage rose from 580 euros ($627) to 780 euros ($844).

The government says all this was made possible because of good fiscal management that saw it borrowing when interest rates were low. Despite spending 66 billion euros ($71.38bn) on pandemic and energy subsidies, it managed to rebalance the budget last year and is enjoying a three billion euro ($3.2bn) surplus in the first four months of 2023. Greece’s growth last year was 5.5 percent, far above the EU average of 3.5 percent, and it is slated to outperform the bloc this year and next. This growth means that Greece’s burdensome debt has fallen as a percentage of GDP, from a high of 212 percent three years ago, to 169 percent last year.

Such fiscal prudence has earned Greece a rapid credit rating recovery. It expects to return to AAA investment grade status this year.

But there is a sense of déja vu. During the recession, Greeks often said, “The numbers are prospering, but the people are poor”.

Philippos Sachinidis, former finance minister and member of the general secretariat of the PASOK socialist party, believes New Democracy’s recovery is fuelled by second-home buyers and tourists, not entrepreneurs building productive new economies.

“Most of the growth has come from real estate. We have been trying since 2010 to grow equally in [farming, manufacturing and services] and to create sustainable jobs – with good salaries and working conditions,” he told Al Jazeera.

“When most of the money coming in is to buy hotels and real estate, it doesn’t increase productivity. If we’re looking for a more resilient and dynamic economy, we’ve achieved neither goal.”

Former Prime Minister Alexis Tsipras’s Syriza, which fell from power in 2019, also accuses New Democracy of practising trickledown economics – nurturing only growth, but not managing wealth distribution.

Its pitch to voters includes immediate pay rises for the public sector and minimum wage earners, a pension hike, abolishing sales tax on food and taxing company profits.

But Syriza has also been criticised of not making good on promises to end austerity when it came to power in 2015, with most opinion polls in the lead-up to the election showing it trailing New Democracy by several percentage points.

The fight ahead

Those who have chosen to remain in Greece are betting that economic and state reforms will continue.

“We believe things are improving and we expect things to keep improving, no matter who is in power,” said Lambros Bisalas, CEO of Sunlight, Europe’s leading manufacturer of industrial batteries, used in forklifts, factory vehicles, golf carts and pleasure boats. “That should be the model economy: No matter who is in power we should have a path towards success,” he told Al Jazeera.

The company says it plans to invest $1.6bn investing in Greece recycling lithium, a frontier technology.

“Our shareholders want to leave a legacy behind them, because they believe this place deserves a better future,” Bisalas said.

Gastrade is another large company betting on Greece. It is building the country’s second liquefied natural gas import terminal offshore the northeastern city of Alexandroupolis, designed to re-export non-Russian gas to Southeast Europe and eventually Ukraine.

Gastrade CEO Kostis Sifnaios told Al Jazeera he believes the region’s gas shortfall after the Ukraine war will be about 50-55 billion cubic metres a year.

Large companies like Sunlight and Gastrade have the time to wait for politicians to make changes, and they have the access to influence them.

But 90 percent of Greek employment is supplied through small companies and the self-employed.

The government has offered tax breaks to encourage mergers and farming-co-operatives, but energy inflation has swallowed up the benefits.

Farming is a high-risk business, subject to market shocks as well as weather.

In Alexandroupolis, Al Jazeera came across farmer Christos Getzelis running his tractor over a field he has already sown with cotton, breaking up hard topsoil caused by unseasonal rain that was preventing his seed from sprouting.

“He has to re-plough and re-seed and re-fertilise,” Nikos Grigoriadis, who directs the Alexandroupolis farming cooperative, told Al Jazeera. “That’s double the cost of everything.”

Grigoriadis says he had to shut down the co-operative’s creamery because energy costs tripled in three years. He is re-organising the co-operative’s cotton gin to run on solar panels and burned waste product to avoid having to close that, too. There has been little help for farmers through these tribulations, he said.

For farmers like Getzelis, and small business owners like Zachou, waiting for the government to become an accelerator rather than an obstacle is hard.

“No one respects you in this country,” Zachou said. “The state is still against us, but we might change that with a lot of individual effort.”