When banks die

MARIANA doesn’t really care who wins today’s referendum. The young pharmacist, working in a relatively poor part of Athens, has more pressing problems: she has been running out of medication fast this week. Greece relies almost entirely on foreign imports for its pharmaceutical supplies. But since capital control imposed last Sunday brought the country’s banking system to a sudden halt, some suppliers have stopped delivering key medication because they cannot get paid. Foreign bank transfers have been banned by the Greek government (with some complicated exceptions which in no way suffice) and Greek credit is no longer accepted outside the country (as stranded Greek tourists found this week when their credit cards stopped working). As things stand, she has another week’s worth of insulin in stock for diabetics but will then have to start turning her patients away. “Do you know what that means?” she asks, trying to keep a proud face, “Do you know what insulin does?”

Hospital employees report similar problems. They have already had their last cash reserves taken from them, by the current government in April, to pay their foreign creditors. But now, with the banks closed, hospitals are in even more trouble. “It was already bad, but it has become much worse this past week and the time ahead really frightens me,” says one Athenian doctor. He explains that his hospital’s inability to import specialised supplies, such as stents used in emergency heart surgery and life-saving medicines, such as cancer drugs, means patients’ lives will soon be at stake. 

And although all local intermediary dealers have some financing problems with their “mothership” suppliers abroad, some multinationals are apparently much harsher than others in insisting on upfront payment. More than one medical professional mentions certain providers of oncological drug treatments as particularly cold-hearted. For hospitals that rely on such supplies, shortages are expected within weeks, not months.

Food shortages are a looming threat too, and not simply on supermarket shelves. The Greek Association of Fodder Industries has warned there could be animal feed shortages within days because farmers (like many Greek businesses) rely on imports from abroad. If animals don’t get fed, this would have a knock-on on the production of basic agricultural products such as eggs, cheese, meat and fish within weeks. And it’s not just raw materials that are at risk. Greece also imports over half of its food but the current banking limits means that such supply chains are cut off.

A butcher says she is one of the few shops in her street that is doing well because her compatriots are prioritising food over other products, such as clothes. “They are in trauma” she says as she wraps up an enormous amount of beef for a middle-aged lady, who says that she will put it all in her freezer. But things may not stay this sunny for long for the butcher; much of the meat in her shop comes from Italy and they are starting to insist on up-front cash payments.

Food shops and petrol stations are more or less the only businesses that have had a good week. Greeks, fearing for the future, are filling up extra jerry can of petrol and are stocking up on dried food, tinned milk and other non-perishable products. An elderly gentleman clutching a fresh €50 bill in his local Carrefour supermarket, that your correspondent met, carefully selected 24 tins of condensed milk, a big bag of Nesquik milkshake powder, three large bags of dried chickpeas and a bunch of dried spaghetti. A girl stacking shelves in the shop confirms that there has certainly been more hoarding by the elderly but not by the young: “they are getting ready because they know our history,” she says. In the past, food shortages often occurred in the aftermath of elections.

But most firms are suffering because customers have simply stopped shopping for non-essentials. “Nobody came this week,” says a tired-looking woman in a budget clothing shop, whilst she and her colleagues puff cigarettes and drink coffee. She has cancelled most of her future orders for now. Taxis are suffering too, partly because public transport is free in Athens throughout the bank holiday week: “It was shit before, but when banks closed… boom” says Alexis, a cab driver, as he mock shoots himself through the head. Panagiotis, a 20-year-old who works in Athiri, a Greek restaurant near the centre of Athens, says until last week they would have around 60 diners per night. This week they had only 12—all of which were tourists.

But tourism, a key pillar of the Greek economy, is also beginning to suffer. Although there have been some cancellations, the bigger issue, says a central Athens hotel receptionist, is that very few new bookings are being made. According to the Association of Greek Tourism Enterprises (SETE), an industry outfit, reservations had been up 3% over the same time last year up to June 26th. But then on June 28th—the day the banks closed—they dropped 17% compared to the year before, 29% the next day, and 30% by June 30th.

Vasilis Korkidis, head of the National Confederation of Hellenic Commerce, has said that the economy has already suffered losses worth €1.2 billion this week. And some reports claim that consumption levels have fallen by 70% since the bank closed. In addition to the collapse in demand, small- and medium-sized companies are struggling to stay afloat, as their supply chains are badly interrupted. For many, business has ground to a near halt.

Meanwhile Greek banks do not have enough cash reserves to last out this coming week. Some have claimed they will run out as early as Monday. “Without Europe’s support our economy will suffocate to death,” says a Greek banker who thinks some form of limited Emergency Liquidity Assistance (ELA), a funding system for banks, whilst keeping existing capital controls and payment restrictions in place, is the only viable solution to fund deposits of importers of basic goods. Without that,  “the country will collapse within weeks and we will have a humanitarian crisis within our very own Europe,” he warns.

Even a “yes” vote today will not fully relieve the situation. It will still take time for a comprehensive agreement to be reached between the Greek government (or whoever is in charge at that stage) and its creditors. Marina, the pharmacist, does not have time. She shows me a small box with 30 thyroid hormone-replacement pills. Demand for these is much higher than the supply of two boxes a day. Worried about running out, she has limited customers to only one box per person, which should last them a month, even though many are asking for more. A pharmacist on the other side of town confirms they’ve also started informal rationing of certain medication that might run low. Already, a black market has started to emerge for cancer drugs and other foreign medical supplies. But most people just buy out of fear that they won’t be able to do so tomorrow—whatever it may bring. 

Business and finance

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