No Barrier to Exit – Business Migration from Greece

29 July 2015 | Philip Ammerman

While media reports on Greece have been dominated by disclosures by former Finance Minister Yanis Varoufakis’s plans to introduce a public arrears compensation system, a far more damaging phenomenon is taking place. Businesses and individuals are taking every step open to them to migrate their businesses or their finances away from Greece. The damage done by capital controls and by the economic mismanagement of the SYRIZA-ANEL government is reaching epic levels.

In the past two weeks, the following cases have come to my personal attention:

A Greek shipping company with 12 vessels and 15 office staff is moving from Athens to another European jurisdiction. The vessels will be transferred first and a physical office founded. Then the staff in Greece will either be transferred or let go.

An individual with declared deposit savings of € 30,000 is moving his savings outside Greece permanently.

Another individual with a higher declared deposit account from property sales is examining how to reduce the risk of deposit bail-in and transfer all or part of these funds outside Greece permanently.

A Greek food producer and trader is moving as much of his procurement and warehousing permanently to Bulgaria as possible. This means that due to transfer pricing, the profitability of inter-company transactions in Greece will be irrevocably reduced.

A small trader is opening a bank account and company in Malta and will be handling both international sales as well as some national sales in Greece via this company. Again, due to transfer pricing and the ease of doing business in Malta, future tax income from this company going to the Greek state will be irrevocably altered.

A seafront, 4* Greek hotel with 372 rooms is on sale for € 6 million. This is dramatically below the equivalent price/room seen in Greek hotel sales transactions prior to the credit controls.

A Greek tech start-up has given up on patriotic aspirations and is registering their business in London or New York.

A small engineering company moved their registration to London.

This is anecdotal evidence and hardly represents a scientific sample. But considering all that has happened in Greece over the past 6 months, I expect this trend will continue. I also expect it is irreversible:

The business jurisdictions in other countries (Cyprus, Malta, UK) are far more efficient and streamlined than those in Greece. All business with public authorities is done via the internet directly or through an accountant. There is no need for the phenomena seen in Greece: long queues at public authorities; conflicting information; multiple “stamp” authorisations; bribery to speed routine transactions.

These business jurisdictions have a far lower tax cost than Greece.

These jurisdictions are stable, follow system-based procedures, and treat foreign investors as customers with basic human dignity, not as a class enemy or ragia.

Under European Union rules, any European citizen or company is free to register and operate a business or deposit their savings in any other European state. As a result, the move to attract investment with a pro-business system is legal and indeed rational.

This movement away from Greece is apparently unnoticed by the Greek government or authorities. There have been no practical measures to improve the business climate, the regulatory environment or the public sector in Greece from the viewpoint of private enterprise. Indeed, any changes that have been made over the past six months have been negative: expanding the public sector; raising taxes; implementing capital controls; cancelling new or existing investments.

A Greek saying goes “When the glass is broken, it can’t be put back together again.” I believe this is exactly what is happening now.

Capital controls and the self-aggrandizing statements by Alexis Tsipras, Yanis Varoufakis and other SYRIZA politicians have finally and irrevocably destroyed what little trust was left in the Greek public sector, at least by the “productive classes”.

No rational economic actor would want their survival determined by such people. The decision to migrate is literally a telephone call or email away. There is no barrier to exit.

As a result, I cannot see how the ambitious revenue targets of the Third Greek Bail-out will be met.

Philip Ammerman