The Greek Prime Minister wants to reform his country’s economy.
(Photo: Reuters)
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Athens An old flatbed truck, a small hall in the Athens industrial park Votanikos, five employees: Philippos Psaropoulos’ company, a specialist in aluminum construction, is a typical Greek small company. Psaropoulos and his people are skilled and hardworking.
The 43-year-old entrepreneur cannot complain about a lack of orders given the property boom in Greece. But he is often overwhelmed. When Psaropoulos was recently asked to deliver windows and doors for a new six-story hotel building, he had to give up: “I can’t do that with my financial resources, my machines and my manpower.”
Operated like that of Philippos Psaropoulos, the government of the Conservative Prime Minister Kyriakos Mitsotakis now wants to help out. With tax breaks, cheap loans and subsidies, she wants to give companies incentives to grow through mergers, takeovers and collaborations.
Small businesses are one of the major structural weaknesses in the Greek economy. 48.5 percent of Greek companies employ fewer than ten people. On average in the EU, these companies make up 30 percent. Small businesses with up to five employees account for 56 percent of employment.
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Only one in five Greek companies has more than 250 employees. The innovative strength, productivity and liquidity of most companies are correspondingly weak. This plunged many Greek small business owners into bankruptcy during the financial crisis from 2010 to 2018 and now again in the corona lockdown.
“We want to help small businesses so that they can grow,” explains Alex Patelis, Prime Minister Mitsotakis’ chief economic advisor to Handelsblatt. “These companies should be enabled with government funding to increase their productivity, they should become more innovative, export more and invest more,” says Patelis. “This can be achieved with traditional mergers, but also with platforms for the formation of company clusters.” Company cooperations, for example in procurement, marketing and sales, could also be funded.
Greece relies on funds from the EU pandemic fund
Patelis believes that the fear that state funding will distort competition or even lead to market dominance is unfounded: “Our program is aimed at very small companies, not large ones,” says the government advisor.
The government intends to regulate the details of the funding measures in a law that is being drafted under the leadership of Deputy Finance Minister Theodoros Skylakakis. It should be passed by parliament this summer.
The funding concept is part of the national Greek development and resilience program “Greece 2.0” within the framework of the European Next Generation EU fund. With the plan, the EU wants to cushion the economic consequences of the corona pandemic and make the member states crisis-proof. Greece expects grants of 17.8 billion euros and low-interest loans of 12.7 billion euros from the pandemic fund over the next six years.
The government intends to use part of these loans to encourage mergers and acquisitions. Subsidies are intended to help small businesses modernize their means of production. Another pillar of the program are tax breaks. Mitsotakis recently announced a cut in corporate taxes from 24 to 22 percent.
The tax cut already applies to profits for the current financial year. The government expects more investment from this. Now Vice Finance Minister Skylakakis is planning to encourage mergers and acquisitions with further corporate income tax discounts limited to a few years. The government also wants to simplify the previously lengthy approval process.
“We hope that this will increase the average company size in order to increase the efficiency and export strength of the companies,” says Skylakakis. Audits are intended to ensure that only those mergers are funded that actually lead to more added value and greater competitiveness and are compatible with the EU’s goals for climate protection and digitization, according to the Ministry of Finance.
More: Greece wants to phase out lignite with green hydrogen in 2025
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