Greece gets more time to fight in war against debt

Euro Zone: The euro-zone bailout and debt restructuring will give Greece breathing room and much-needed cash. Greeks at the Gulfood expo say the money is critical in restoring lending for SMEs.

Greek finance minister Evangelos Venizelos, left, and Greek prime minister Lucas Papademaos. AFP

As a young officer in the Greek navy, Dimitri Podaras fought for his country against Nazi Germany during the Second World War.

Now, the 84-year-old military veteran is battling to keep a roof over his head. Government austerity measures cut Mr Podaras's pension by 25 per cent during the past year, but his outgoings on rising fuel bills and tax on his apartment in Athens have surged by 30 per cent.

He is one of millions feeling the pain of a debt crisis ripping through the Mediterranean nation.

"My father survived the Second World War and worked all his life to build up a nest egg, and now he is fearing being thrown out onto the street," says his son John Podaras, 53, who lives in Dubai.

"The vast majority of the working classes are feeling the pinch, and life's essentials are having to be worn down. Most of my friends in Athens are having to not put their heating on to save money," he says.

Many Greeks have abandoned their indebted homeland try to build livelihoods overseas. About 1,000 young Greeks have left for the UAE during the past year, says Mr Podaras, who runs a hospitality consultancy in the UAE. He estimates the total Greek expatriate population at 3,000.

"We have seen a massive influx of young people coming into the Emirates, and what is disturbing is that they are not making plans to return to Greece until retirement," he says.

"Before, Greeks coming to Dubai would be experienced professionals. Now they are coming to work as plumbers, hairdressers or happy to work in hotels."

In an effort to stop Greece from slipping further into the abyss, euro-zone finance ministers yesterday sealed a €130 billion (Dh631.72bn) bailout after persuading private bondholders to take huge losses. The cash is needed to help Greece avoid a chaotic default next month.

The talks stretched to 13 hours as ministers hammered out how to cut Greece's debt to a level that it could eventually pay back, while not raising their own commitments. Ministers eventually agreed on measures to cut the country's debt to 120.5 per cent of GDP by 2020, slightly above the target.

"This buys Greece some time," says Fabio Scacciavillani, the chief economist of the Oman Investment Fund. "It provides Greece with some resources to keep the economy going for a bit longer in exchange for measures which don't seem to be enough to restore growth in the foreseeable future."

Greece's economy is struggling to recover from a recession brought on by the country borrowing heavily before the global financial crisis in 2008. The strategy unravelled when the downturn raised the cost of plugging its bulging deficit.

The situation became so dire that in 2010 the government asked for a €110bn bailout from the EU and IMF. In return, Greece was required to make drastic public-spending cuts.

The prospect of another dose of austerity as part of the latest agreement is unlikely to be well-received by the Greek public, says Mr Podaras.

The streets of Athens were rocked by strikes and riots in protest against the previous cuts. Many blame politicians and the wealthy for the crisis and believe they are unfairly bearing the brunt of huge public sector and welfare cuts.

"I know from friends and relatives in Greece that the sentiment is gloomy," he says. "There's a general belief that the bailouts are delaying the inevitable. After two years of austerity, our debt-to-GDP level has not come down significantly."

Others are more upbeat.

Greek companies at this week's Gulfood expo in Dubai said the bailout money could encourage banks to lend to small businesses and end a hiatus in domestic lending.

Vasilis Batalas, the marketing manager for Olympos, a producer of sesame seed-based food, pointed out that bank financing was crucial for many companies because they could not get trade credit when buying products and ingredients abroad.

"For my business, Greece has to take the money. We need the money because our banking system will not lend to us, so we will not have money to buy products," he says.

Business executives say that even though the bailout conditions are harsh, the alternative would be for Greece to leave the euro system and see the domestic banking system suffer dramatically, crippling financing to small and medium-sized businesses.

Stathis Giachanatzis, the managing director of Fedon, a confectionary company based in Nea Santa Kilkis, says banks are lending only to companies with a strong credit history.

"At the moment it's very difficult to take money from the banks," he says. "Of course, a good percentage of the companies have good credibility to the market in Greece, so it's easier to receive money from the banks in order to finance their activity and development, but for many other companies, it will help a lot, this financing from the European Union, because it will help jobs and lending."

Kostas Kasapis, the sales manager at the Association of Agricultural Cooperatives, echoed those views.

"We have had problems with the financial institutions in Greece because they do not finance us," he says. "The cost of life is increasing."

While some Greeks may feel the latest bailout signals a breakthrough, more misery may be around the corner.

"A lot remains to be done, in the immediate future, to complete prior actions for the conclusion of the loan agreement expected in early March," Lucas Papademos, the Greek prime minister, told reporters in Brussels.

twitter: Follow our breaking business news and retweet to your followers. Follow us