Insurers Halting Coverage on Exports to Greece Cuts Deep

ATHENS – The decision by two of the world’s biggest trade credit insurers to halt coverage for companies importing products and goods to Greece is already starting to cripple small businesses, and many said it could be the death knell for their companies. The world’s two biggest trade credit insurers – Euler Hermes and Atradius – said they had stopped providing cover for export shipments to Greece because of growing fears the country could be forced out of the Eurozone after its critical June 17 elections and return to the drachma.
“This may be the final blow to the Greek market,” Alkis 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, told Reuters, which gave an analysis of how grim the picture is. “We depend on imported goods. The future looks very dark and we’re very afraid,” he said.
Greece is heavily dependent on imports. Last year, it imported goods worth $59.6 billion, more than twice what it exported, according to data from the International Monetary Fund (IMF,) which, along with the European Union and European Central Bank, makes up the Troika providing Greece with its last access to money.
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 insurers cover exporters against the risk of not getting paid, but with the government already having stopped paying its bills long ago, there are fears that private companies also will.
Parties opposed to the austerity measures demanded by international lenders in return for $325 billion in two bailouts say they want to renegotiate or renege on the terms, which critics said could lead to Greece being pushed out of the Eurozone of the 17 countries using the euro as a currency and trigger upheaval in international markets. Problems for many Greek businesses began when insurers started tightening the terms for exporters to Greece in response to long payment delays. That forced the exporters to clamp down on credit totally or partially, which meant importers had to place smaller staggered orders, pushing up delivery costs.
Vasilis Korkidis, head of the ESEE retail federation, told Reuters that 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. He said he hoped insurers would review their decision after the election. “Otherwise the suspension of credit altogether will lead to the isolation of Greece.”
Exporters from Greece are also affected and Greek exports, which had been seeing a rise as businesses looked outside the country for customers, are falling fast. Dimitris Lakasas, President of the SEVE Greek International Business Association, said every manufacturing business imported raw materials. His 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, told Reuters that the trade insurers’ decision threatened his livelihood and future of his company, which 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 60 years 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.” He added, “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.”