Greek economy, businesses struggling under capital control

Ever since bank closures and capital controls began in Greece on June 29, Greek businesses have been facing extremely tough times and have reported 1.2 billion euros (1.3 billion U.S. dollars) of losses in two weeks, according to industry estimates.

The Greek market is suffocating with a significant percentage of personnel on mandatory leave and payments and supplies on hold due to liquidity problems, experts told Xinhua Friday.

According to Vasilis Korkidis, head of the National Confederation of the Hellenic Commerce, there are no closures of businesses or mass layoffs recorded yet.

However, the question raised is with bank withdrawals limited to 60 euros per day, how can businesses be sustained?

"Greek businesses have come up against a severe situation that can be overturned if we have a deal with international creditors on Sunday," Korkidis told Xinhua.

Until then imports, exports, the operation of factories, small businesses and transports, are frozen. The capital controls forbid money transfers abroad, except by permission from a special committee of the Ministry of Finance.

"The Greek economy has suffered losses worth 1.2 billion euros since the introduction of capital controls," Korkidis said. "The only sectors in demand are food and fuel."

The use of e-banking in order to pay suppliers abroad and to deliver orders could be a short term solution, he suggested.

The tourism industry, a key pillar of the Greek economy, has been hit as well after the dramatic developments of the last few days.

"Reservations from large foreign tour operators that were made months ago have not been influenced, but there is a 30 percent of cancellations in the last minute bookings," Alexandros Lamnidis, general manager of the Association of Greek Tourism Enterprises, told Xinhua.

Before the announcement of the referendum, reservations had been up 3 percent over the same time last year up to June 26, he added.

"The main problem is the shortage of cash liquidity in the market. Small businesses, which represent 80 percent of the market in Greece, suffer the most, as they do not use the web banking system and depend on cash," Lamnidis noted.

Supermarket chains and the food industry in Greece have also been hit with concerns over shortages of fresh meat, fish and dairy products if the situation does not normalize.

Even if there is a deal reached over Greek debt this weekend, experts warn more than two months will be needed in order for the economy to return to stability.