Greece’s Achilles Heel?
From the first recorded speculative bubble —the Dutch “Tulip mania” of 1637—to the present day via the “South Sea Bubble” of 1720 in Great Britain and the Great Depression of 1930 in the United States, global financial crises are not new. The current global disruption is the deepest and broadest financial crisis since the 1930s, and has reignited the debate over what role entrepreneurship can play in the recovery of the global economy, as well as what lessons we can gain for managing or preventing such crises.
The present essay addresses these questions in regards to Greece. There has been much discussion of the Greek financial crisis that began in May 2010, when it became evident that Greece could no longer service its growing debt. In the summer of 2010, the European Central Bank, the European Commission, and the International Monetary Fund managed to cover the borrowing needs of Greece. In July 2011, a half rescue package was offered to Greece under structural reforms that the Greek government was required to implement. The situation remains unresolved, with a high unemployment rate above 26% in November 2012 (1), and especially for youth above 50% in August 2012 (2). The truth is that the recently formed coalition government struggling to guide the country through its present financial troubles. Greece is confronting its own “Symplegades”, risking destruction from circumstances beyond its control.
Background: Greece and Doing Business
Although Greece claims in its international pledge to be a nation friendly to business and investments, the harsh truth is that it still has a long way to go before becoming a fully-friendly country to business. The BDO Ambition Survey 20121 of finance directors from global business consultancy BDO (3) finds that the crisis over too much government debt in Europe remains one of their key concerns—so much so that Greece is considered a riskier place to invest and set up business in than war - torn Syria and Libya (3). Only Iran and Iraq are considered more risky than Greece on BDO Global Risk Index. According to BDO chief executive Martin Van Roekel “Chief Financial Officers (CFOs) are becoming increasingly wary of Southern Europe, parts of which they now see as risky as the politically unstable countries of the Middle East”.
Also useful is to know how Greece ranks relative to other economies and relative to the regional average on the ease of doing business. Specifically, Greece is in the worst ranking, since Germany ranks 20th, Spain 44th and Italy 73rd and the Regional Average of the ease of doing business in high income countries of OECD is 29. The truth is that there is an improvement since on “Doing Business 2012” index, country ranked 89th (4). But in order to achieve an integrated view, we should also look at the distance of Greek economy to the frontier measure, which shows how far each economy is from the best performance achieved by any economy since 2005 on each “Doing Business” indicator sets. The measure is normalized to range between 0 and 100, with 100 representing the best performance (the frontier). For example, Greece has a score of 59.4 in Doing Business (DB) 2012 means that economy was 40.6 percentage points away from the frontier constructed from the best performances across all economies and across time. The score of 62.0 in DB 2013 indicates that the Greek economy is slightly improving, i.e. 38 percentage points away from the frontier (4).
Greece also has many issues in terms of how easy or difficult it is for a local entrepreneur (the person who starts or organizes a commercial enterprise, especially one involving financial risk) to open and run a small to medium-size business when complying with relevant regulations. Data rank Greece 78th (from a 1 to 185 scale) on ease of “Doing Business 2013” index (4). This particular index calculated as the ranking on the simple average of its percentile rankings on each of the 10 topics included in the index: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency (4).
Challenges for Young Entrepreneurs
Greece encounters many problems, but there are many ways in which young people can play a vital role in the national economy. Instead of leaving the country and choosing the atomistic solution of migration, youth can do something new and cooperative, outside the public sector and the University. This can take many forms. It may be a new company or a new product, an example of a collective effort because youth successfully combine imagination and practice, have a vision to the future, and they are capable of overcoming obstacles. Specifically, youth with the increased positive mood that characterized them can establish new enterprises, which provide them with dignity and security, than consistently waiting and relying on jobs announcements of the Greek public sector. It is no coincidence that until recently in the country, the dream of each family for their children was the ensuring of a job position in the public sector of the economy, with a fixed salary and diminished responsibilities.
But which are the specific challenges especially for young entrepreneurs, who want to translate their ideas into products and services? First of all, it is the procedure itself. Specifically, starting a business in Greece requires 11 procedures, takes 11 days, costs 20.5% of income per capita and requires paid-in minimum capital of 24.4% of income per capita, in order to register a new firm (4). In other words, a lot of time and money. All this reflects the bureaucratic character of the process for a future entrepreneur, especially of a young age with limited economical capital and resources and with no access to loans from banks, which reduced their loans rate.
Additionally, there is the increased mistrust and fear in innovative ideas and projects that youth have to face mainly by Greek local communities. The introduction of new products, new processes, or in a more narrow sense, the introduction of technological changes are not always welcomed. Consequently, local and regional milieu has a considerable importance for the competitiveness of firms.
But in all cases, there is always the alternative. With proper leadership and international cooperation, the Greek crisis can be a process of transformation driven by the imperative for change (5). All in all, young entrepreneurs could be the key part of a new era for Greece, the version “after crisis” as I like to say, because youth are truly the drivers of change that can guarantee the function of the country. And as the song goes “Look forward, chase your dreams, on the road everything could happen”.
1. BDO’s Ambition Survey results came of over 1,000 CFOs from mid-sized companies planning expansion in abroad. Bibliography 1. European Restructuring Monitor quarterly (2013). Issue 4 – January 2013. Retrieved in 25 March 2013. http://www.eurofound.europa.eu/emcc/erm/templates/displaydoc.php?docID=74
2. European Restructuring Monitor quarterly (2012). Issue 3 - October 2012. Retrieved in 12 November 2012. http://www.eurofound.europa.eu/emcc/erm/templates/displaydoc.php?docID=72
3. BDO (2012). “Ambition Survey 2012”. “CFOs swing to safe markets. Economic crisis cuts appetite for risk.” Media Information, Press Release: 29 October 2012. Retrieved in 2 November 2012. http://www.bdointernational.com/AmbitionSurvey2012/Documents/Press%20rel...
4. World Bank. (2013). “Doing Business 2013: Smarter Regulations for Small and Medium-Size Enterprises”.Washington, DC: World Bank Group. DOI: 10.1596/978-0-8213-9615-5. License: Creative Commons Attribution CC BY 3.0.
5. Venette, S. J. (2003). “Risk communication in a High Reliability Organization: APHIS.