Could entrepreneurship jump-start Greece’s economy?

By Helen Coster
October 30, 2013

ATHENS, GREECE — Evgenia Papadopoulou runs a Pilates studio in downtown Athens, and over the past three years she has cut her staff from seven to three. Business is down 40 percent, while her studio’s taxes, insurance and electricity costs have increased by as much as 12 percent.

Even so, Papadopoulou feels lucky to be working — and to have started her business almost two decades ago, when bank loans were common and Athenians had steady incomes. Today’s entrepreneurs face a starker climate. Greece is a country in crisis, with unemployment at 27.9 percent – a staggering 58.8 percent among the country’s youth. Through June Greece’s economy declined for the twentieth straight quarter, with GDP shrinking by 4.6 percent. Efforts to pay down Greece’s mountain of debt — including tax hikes, and cuts to wages and pensions — have not had their desired effect, lowering household income and deepening the recession instead.

Could Greece turn its dismal economy around through entrepreneurship? Structural challenges make Greece a notoriously difficult country for entrepreneurs. It ranks 78th in the World Bank’s Ease of Doing Business list, out of 185 countries. Banks don’t give loans. Until recently, angel investors were nonexistent. Venture capital investment as a percent of GDP is essentially zero, compared to .17 in the United States and .04 in Britain. Taxation levels change constantly. Because Greece lacks a formal land registry, entrepreneurs who want to open a hotel or restaurant worry that others will challenge their land rights. Intellectual property law is complicated and expensive. Greece spends a lower percent of its GDP on education than any other EU country, and many graduates feel unprepared for careers in business.

In part because of these reasons — and also because of the appeal of public sector jobs, which until recently have been lucrative and stable — Greek has a limited history of entrepreneurship. Shipping magnates may have made their fortunes on the Aegean, but for most entrepreneurs in Greece, self-employment has been limited to mom and pop shops — tavernas, small retailers and other types of business that are consumption-driven, with low efficiency and low productivity. “If an 18-year-old could not get into university, his parents would open a souvlaki shop for him,” says Haris Makryniotis, the managing director of Endeavor Greece, a nonprofit that supports entrepreneurs around the world. “Businesses were small-scale, unproductive and driven by owners who had no other choice. This is how we entered the crisis in 2008.”

The crisis made things worse, as credit froze and many families saw their income plummet. Today Greece is slogging through its sixth straight year of recession, but is heading toward stability, according to IOBE, an Athens think tank.

More entrepreneurship would likely hasten a recovery. As Deutsche Bank’s Antje Stobbe and Peter Pawlicki write, since Greece can’t improve its competitiveness through external devaluation, it must focus on boosting productivity. GDP growth would help the country reduce its debt burden and return to a manageable public debt-to-GDP ratio. More entrepreneurship would create more jobs, and help diversify an economy that is still heavily reliant on traditional industries such as tourism, agriculture and shipping. The creation of tech millionaires would have a knock-on effect, as wealthy entrepreneurs look to invest in other startups.

There are reasons for optimism. Top graduates are increasingly interested in entrepreneurship, in part because of the lack of other job opportunities. Athens has a growing tech scene with promising startups like Taxibeat, an Uber-like smartphone app that has raised $2 million in venture funding. In the last year four firms – Odyssey Venture PartnersFirst AthensOpenfund and PJ Tech Catalyst – have used EU and Greek government capital to invest in startups, through the JEREMIE initiative (Joint European Resources for Micro to Medium Enterprises). “If you are 18 years old and you have a good idea in technology, it’s easier today than it was five years ago to start it,” says Endeavor’s Makryniotis. “The Silicon Valley dream is powerful here.”

Traditional sectors, like agriculture and tourism, are ripe for innovation. In the Peloponnesian city of Corinth, two-year-old startup Fereikos-Helix operates a network of 175 snail farmers, and sells cleaned, pre-cooked snails through the brand “Fereikos.” It exports 70 percent of its snails. Boat rental marketplace Incrediblue – which launched in January with seed funding from Openfund — is like an Airbnb for yachts. It started in Greece and now facilitates boat rentals in 17 other countries. “A prerequisite for our entrepreneurs is that they create a global product,” says George Tziralis, a partner at Openfund.

To be sure, Greek entrepreneurs aren’t the only ones struggling. In the United States entrepreneurs face their own set of hurdles, including byzantine immigration laws and a lack of qualified employees. But startups remain a significant engine of U.S. jobs growth, with companies that are five years old or younger accounting for all of the country’s net job creation, according to the Economist.

Investors in Greece compare their startup scene to Silicon Valley in the 1970s. “You might say that we are just at the beginning,” says Openfund’s Tziralis. “Our ecosystem is maturing by the day. It’s almost common for a young person to consider entrepreneurship as a viable career. We’re trying to create some Greek Zuckerbergs.”

PHOTO: People wait for their turn outside a Greek Manpower Employment Organisation (OAED) office in an Athens suburb October 10, 2013. REUTERS/John Kolesidis

 

2 comments

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This author misunderstands the basic fundamentals.

Greece is broke. Their debt is incredible. They can’t pay their debt. It is impossible.

You would have to be crazy to put any money in a Greek bank, more crazy to buy Greed bonds. Until this mess is cleared up, they will piddle along but not grow.

Reported just today from ekathermini

By Yiannis Papadoyiannis

Nonperforming loans (NPLs) have grown this year to more than twice the size of local banks’ capital, as, according to a report by PricewaterhouseCoopers (PwC), they now amount to 65 billion euros, while the capital base of domestic lenders stands at 30 billion euros.

PwC added that the share of bad loans has exceeded 30 percent of all loans issued, up from 25 percent at end-2012 and 18 percent at end-2011.

2 things will occur:

1. They will do a Cyprus action, and grab all bank accounts. Then take a portion of all just as Cyprus did.

When they run through that and it is not enough

2. They will leave the EURO.

. To invest before 1 & 2 above occur is to put your money at very high risk.

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Posted by Alexaisback | Report as abusive

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While I never guaranty anything, or rarely, my above post is as close to guaranty as one can make. To know why you have to understand what just occurred.

A HUGE issue, INCREDIBLE RULING happened in Greece yesterday – ignored by most all of the media.

Background: Greece cannot collect taxes so they started using electric bill to collect taxes and shut off any ones electric that did not pay.

ekathermini reported yesterday:

Man cleared for helping households get power back

The man who claims to have led the way in reconnecting people’s electricity after it had been cut off due to unpaid bills was cleared of wrongdoing by a court in Veria, northern Greece, on Thursday.

Nikos Aslanoglou led a group of citizens in the Macedonian city who reconnected homes to the power grid after they had been cut off by the Public Power Corporation.

Groups in other parts of Greece followed suit.

Aslanoglou appeared in court over a September 2011 connection, which he claimed was the first in Greece.

The misdemeanors court found him not guilty over reconnecting the home of an unemployed man as it deemed that access to electricity is a fundamental social right.

Aslanoglou said he would continue his activism.

—– The misdemeanors court found him not guilty … as it deemed that access to electricity is a fundamental social right —–

—– access to electricity is a fundamental social right —– well of course it is, what isn’t ?

So we will see how they next try to collect taxes.

The Cyprus grab mechanism is all but guaranteed.

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Posted by Alexaisback | Report as abusive