Greece finally growing, but taxes crushing new businesses

If Greek business needed a role model, Stathis Stasinopoulos would make an ideal candidate.

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An athlete, engineer, and entrepreneur, he invented an easy-folding bicycle design and began building them himself and created a small company. The project was shortlisted for a national start-up award in 2014 and, the following year, he peddled onto the stage to applause to give a motivational speech.

Today, he has some advice for young Greeks with a good idea: "Get your passport and leave."

In July, Stasinopoulos took his family and dream of a self-made business and moved them from Athens to bicycle-friendly Bremen, a city in northwest Germany. Years of effort had been crushed by high taxes and outdated bureaucracy.

"There are a number of reasons why I made the move. Many of them have to do with taxes," Stasinopoulos said, speaking at the small workshop of his newly-registered German firm, Velo Lab GmbH.

Greece is getting ready to exit its bailout program next year and the country is finally emerging from nearly a decade of financial depression and stagnation. For most Greeks, however, the recovery is likely to be slow and painful as austerity measures will endure for years to come. That's particularly true for many startups, which the government has put its faith in to help the economy grow, but are burdened by red tape and the high taxes meant to pay for the country's debts.

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The government is trying to advertise the country as a potential new hub for European investors looking to tap Greece's large pool of under-employed university graduates. A limited number of new businesses can qualify for tax breaks, but still Greece slipped in the World Bank's 2017 global ranking for ease of doing business. And most of the new jobs being added to the economy are low-paid and seasonal. Nearly half of the workers hired in 2017 do not officially work full time and are paid under 400 euros ($465), according to government data.

The 41-year-old Stasinopoulos found himself in a bind familiar to many in business. Taxes rose but rebate payments were delayed, and hopes of growing exports were crippled when the government put controls on the size of bank transfers two years ago.

In 2017, the government increased workers' monthly contributions to health care and pensions and even demanded that businesses pay steep taxes on earnings they had not even made yet but forecast for the following year. Emergency taxes on income and property were extended to continue beyond the end of Greece's bailout program, breaking pledges made by successive governments.

"That was the killer for me. It was impossible to continue," Stasinopoulos said.

Greece became unable to finance itself on bond markets seven years ago, when it was revealed that its public deficits were much higher than reported.

As the country accepted loans from a eurozone rescue bailout and the International Monetary Fund, it agreed to a drastic re-engineering of its economy by slashing spending, public sector jobs and raising taxes.

Living standards dropped at the fastest rate in the European Union — leaving nearly a quarter of the country unable to meet basic needs like heating their homes or keeping up with utility bill payments. The crisis left just 49 percent of the adult population with a paid job, while up to 100,000 people per year left to find work abroad, according to data from Greece's central bank and the Paris-based Organization for Economic Co-operation and Development.

The country is now preparing to end its international bailout programs in 2018 with an enormous bill left to pay: more than 320 billion euros ($372 billion) in national debt, or roughly 180 percent of annual economic output, most of it owned not by private bond holders but rescue creditors from other eurozone countries and the IMF.

There is relief that economic indicators are now getting better rather than worse — not an assumption the country could often make in the past decade. The European Commission expects the Greek economy to grow by 2.1 percent this year and 2.5 percent in 2018. Credit for businesses is somewhat easier to come by and deposits are trickling back into Greek banks, according to figures reported this week by the central bank.

The number of businesses created since Jan. 1, 2015 finally exceeded the number of failures several months ago.

"Despite all the hurdles, there is a positive outlook and there are companies taking hope from that," said Nick Skrekas, a representative of two Cyprus-based companies that recently expanded to Greece, corporate service provider InvestCor Corporate, and cyber security firm GNL Europe. "When companies expand to Greece it's a vote of confidence. After such a crippling crisis, it's good news."

But the progress is painfully slow and doubts remain about how successful governments have been in modernizing the public sector and business environment.

"The recovery narrative coming from the government and the EU institutions is overstated. Greece is benefiting from the strong cyclical upswing in the eurozone," said Joan Hoey, regional director for Europe at the Economist Intelligence Unit.

"Greece is on course to grow modestly this year, but from a very low base," Hoey said. "The economy is still more than a quarter smaller than it was in the first quarter of 2008."


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