ATHENS (Reuters) - Faced with the prospect of closing his family business and looking for work in Greece’s sickly economy at the age of 65, Alkis Iliadis bemoans a decision by trade insurers to stop covering exports to his debt-choked country.
“This may be the final blow to the Greek market,” said Iliadis, chief executive of a small firm that distributes solar panels, materials for diamond tool makers and chemicals and machines for the marble processing industry across Greece.
“We depend on imported goods. The future looks very dark and we’re very afraid,” he said.
Days after the world’s two biggest trade credit insurers - Euler Hermes and Atradius - said they had stopped providing cover for export shipments to Greece due to mounting fears that Athens could be forced out of the euro, firms and trade lobbies are painting a grim picture of what lies ahead.
Echoing the pain of similar small firms that make up a big chunk of the economy, Iliadis, secretary-general of the Athens Association of Trade Representatives, said it was impossible to order anything on credit, forcing him to burn through cash reserves to pay upfront.
“We used to buy machinery to cut marble from a Korean company with payment up to 10 months after delivery. Now we have to send the money with the order. First we pay, then they dispatch,” he said. “This lack of trust is catastrophic.”
The move by Euler Hermes and its rivals, including third-ranked Coface which halted credit cover in November, reflects anxiety ahead of a June 17 election seen as a referendum on the country’s future in the euro.
Such insurers cover exporters against the risk of not getting paid.
A victory in the election by parties that want to ditch the harsh austerity measures attached to a 130-billion euro international bailout could hasten a ‘Grexit’ from the euro, forcing companies to revert to the drachma and making it harder for Greek importers to pay euro-denominated invoices.
Problems began when insurers started tightening the terms for exporters to Greece in response to long payment delays. That in turn forced exporters to clamp down on credit totally or partially, which meant importers had to place smaller staggered orders, pushing up delivery costs.
Exporters from Greece are also affected.
Dimitris Lakasas, president of the SEVE Greek International Business Association, said every manufacturing business imported raw materials.
His own company, Olympia Electronics, is one of Greece’s oldest electrical manufacturers, and produces and exports high-tech security systems to more than 72 countries. It relies heavily on raw material imports such as transistors and batteries from the Netherlands to Hong Kong.
Tasos Pantelakis, chief executive of PAMAR, a small business in Athens that imports food packaging materials, said the trade insurers’ decision threatened his livelihood too.
Aged 48 and married with two children, his firm imports hi-tech plastics and other materials used in food packaging from France, Germany, Poland, Ukraine, China and the United States. It then sells them on to suppliers across Greece.
“It’s the same story for every importing company - I’ll be forced to find different ways to operate,” said Pantelakis, who is also head of a local Athens trade association. “Right away, I’ll have to tell my clients - listen, you need pay up front. But where will they find the money to do so?”
Pantelakis, whose company was founded six decades ago, said the crisis had already badly hurt his business.
“You have to decide what to leave unpaid - besides yourself, who is always unpaid - will it be the staff, social security or, suppliers? I‘m at my limit. It is very likely that I’ll have to close down the company if this situation goes on.”
Turnover was down by 60 percent on five years ago and he had been forced to reduce his staff from 11 to four.
“Unless the situation changes dramatically we’ll see very bad things in the second half of the year - shortages of raw materials, people left on the street, people psychologically crushed.”
Greece’s 215-billion-euro economy is stuck in its fifth year of recession. Manufacturing has been particularly badly hit, with sharply reduced domestic demand.
The country is heavily dependent on imports. Last year, it imported goods worth 45.6 billion euros, more than double the 20.2-billion-euro value of its own exports, according to International Monetary Fund data.
Vasilis Korkidis, head of the ESEE retail federation, said the country’s agricultural sector was in disarray and it would need at least two years to get it export-ready.
Warning that about 200,000 companies each employing fewer than 10 people will be worst affected, he said shortages in raw materials could come as early as September, once the existing insurance credit contracts expire, followed by shortages in fuel, drugs and food.
Greece imports nearly all its medicines.
Korkidis said he hoped insurers would review their decision after the election. “Otherwise the suspension of credit altogether will lead to the isolation of Greece.”
Editing by Andrew Osborn and Giles Elgood