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Bulgaria benefits from weakness of Greek economy Bulgaria benefits from weakness of Greek economy
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Every time Akis Agorastos drives back over the border from Bulgaria to Serres, the northern Greek town where he was born, his blood pressure rises a little.Every time Akis Agorastos drives back over the border from Bulgaria to Serres, the northern Greek town where he was born, his blood pressure rises a little.
The shuttered stores, derelict factories, myriad "for rent" signs and empty streets fill him with gloom. "Anger and sadness overwhelm me," said the entrepreneur. "I grab the steering wheel a little tighter and feel my pulse rise. I can't believe that this is the country where I grew up. For my generation it was never meant to be this way." The shuttered shops, myriad "for rent" signs, derelict factories and empty streets fill him with gloom. "Anger and sadness overwhelm me," said the entrepreneur. "I grab the steering wheel a little tighter and feel my pulse rise.
In 2012, at the height of Greece's debt crisis, Agorastos moved his business – an American-style gym that only a year earlier had been thriving in Serres – across the border to Bulgaria. Relocating was not easy: he had to rent three trucks "at enormous expense" to ferry sports equipment to the southern Bulgarian town of Blagoevgrad, 100 miles north of the frontier. "I can't believe that this is the country where I grew up. For my generation it was never meant to be this way."
In 2012, at the height of Greece's debt crisis, Agorastos moved his business – an American-style gym that only a year before had been thriving in Serres – over the frontier to Bulgaria. Relocating was not easy: he had to hire three lorries "at enormous expense" to ferry sports equipment to the southern Bulgarian town of Blagoevgrad, 100 miles north of the border.
And then, he added, there was the risk of moving to a country that was itself the poorest member of the EU and where few wanted to stay at all.And then, he added, there was the risk of moving to a country that was itself the poorest member of the EU and where few wanted to stay at all.
"But after doing my sums I understood it was the only way to survive," said the 32-year-old, whose enterprise is now ensconced in a subterranean room that, though a fifth the size of his outlet back in Serres, is also a tenth of the price to run. "But after doing my sums I understood it was the only way to survive," said the 32-year-old, whose enterprise is now ensconced in a basement a fifth of the size of his outlet back in Serres – and a tenth of the price to run.
"Like everyone I was being really squeezed by taxes and my rent for the gym alone was €12,000 (£10,045) a month. After the first memorandum," he said – referring to Greece's initial €110bn EU-IMF sponsored bailout – "people began being so affected by cuts the first thing they dropped was their membership to the gym. It got the point where I couldn't afford to pay the rent, or the electricity bills, or the taxes." "Like everyone, I was being really squeezed by taxes and my rent for the gym alone was €12,000 [£10,000] a month. After the first memorandum," he said, referring to Greece's initial €110bn EU-IMF sponsored bailout, "people began being so affected by cuts the first thing they dropped was their membership to the gym. It got to the point where I couldn't afford to pay the rent, or the electricity bills, or the taxes."
The spectre of a former eastern European state like Bulgaria offering stability and solace to entrepreneurs such as Agorastos would have been inconceivable not that long ago when Greece, the Balkans' only EU member, was attempting to cast itself as the regional economic leader. A former Soviet bloc state such as Bulgaria offering stability and solace to entrepreneurs such as Agorastos would have been inconceivable not that long ago when Greece, the Balkans' only EU member, was attempting to cast itself as the regional economic leader.
Agorastos is far from alone. What started as a trickle of Greek companies branching out to the new market economies of neighbouring Balkan states before the crisis had even begun, has turned into a steady flow as businesses seek to escape crippling duties and an economy that for six straight years has been entrenched in austerity-driven recession. Agorastos is far from alone. What started as a trickle of Greek firms branching out to the new market economies of neighbouring Balkan states before the crisis had even begun has turned into a steady flow as businesses seek to escape crippling duties and an economy that for six straight years has been entrenched in austerity-driven recession.
In sharp contrast to Greece where corporate tax rates range between 20% and 25% and businesses are subjected to an ever-changing tax administration, Bulgaria has a flat tax rate of 10%, the lowest in the EU. In sharp contrast to Greece, where corporate tax rates range between 20% and 25% and businesses are subjected to an ever-changing tax administration, Bulgaria has a flat tax rate of 10%, the EU's lowest.
The Greek prime minister Antonis Samaras's pledge that 2014 would be the year of economic recovery when Greece exits its international rescue programme and returned to growth was met with disbelief if not disdain by the country's business community. The pledge of Antonis Samaras, the Greek prime minister, that 2014 would be the year of economic recovery when Greece left its international rescue programme and returned to growth was met with disbelief, if not disdain, by the country's business community, where there remains a huge disconnect between fiscal progress and the mood on the ground.
This week's conclusion of months of talks to release €10bn of aid, and a promised return to international bond markets before May, have done nothing to silence critics who say a third bailout will be needed to address the country's monumental debt problems.This week's conclusion of months of talks to release €10bn of aid, and a promised return to international bond markets before May, have done nothing to silence critics who say a third bailout will be needed to address the country's monumental debt problems.
Although Athens has regained some of its competitiveness, with labour costs falling dramatically since its indebted economy became the ward of international lenders, Albania, Bulgaria, Romania and Macedonia are still cheaper, offering a minimum monthly wage of around €350. Although Athens has regained some of its competitiveness – with labour costs falling dramatically since its indebted economy became the ward of international lenders – Albania, Bulgaria, Romania and Macedonia are still cheaper, with a minimum monthly wage of about €350.
Analysts point to record levels of unemployment and poverty and say Greece's productive economy has all but collapsed in the four years since revelations over the true size of its deficit led to Europe's worst crisis in decades. Analysts note record levels of unemployment and poverty, and say Greece's productive economy has all but collapsed in the four years since revelations over the true size of its deficit led to Europe's worst crisis in decades.
Last month's official figures showed industrial output in December rising for the first time in six months, but that came after it fell 3.6% over the year and it has dropped about 30% from its peak. Unemployment remains at 27.5% on the latest figures and protests continue as public sector workers face 11,400 job cuts this year, as demanded by bailout lenders. Last month's official figures showed industrial output in December rising for the first time in six months but that came after it fell 3.6% over the year and it has dropped about 30% from its peak. Unemployment remains at 27.5% on the latest figures and protests continue as public-sector workers face 11,400 job cuts this year, as demanded by bailout lenders.
"In no way can we talk of a turnaround big enough to stop the trend," said Chryssa Manoulidou, president of the Orestiada-based union of manufacturers in the northern Evros border region. "There is still a huge amount of uncertainty. We're talking about a recession the likes of which has never been seen in peacetime and a situation that is still far from stable." "In no way can we talk of a turnaround big enough to stop the trend," said Chryssa Manoulidou, president of the Orestiada-based union of a manufacturers in the northern Evros border region. "There is still a huge amount of uncertainty. We're talking about a recession the likes of which has never been seen in peacetime and a situation that is still far from stable."
The number of Greek companies registered in Bulgaria rose 75% between 2010 and 2012, from around 2,200 to nearly 3,800, according to the National Revenue agency in Sofia. Last year, Greek media estimates put the figure at 6,000 and reported that companies with Greek Bulgarian ownership surpassed 15,000. The number of Greek firms registered in Bulgaria rose 75% between 2010 and 2012, from about 2,200 to nearly 3,800, according to figures released by the national revenue agency in Sofia. Last year, Greek media estimates put the figure at 6,000 and reported that companies with Greek/Bulgarian ownership surpassed 15,000.
"In Greece it's impossible to operate a business now," said Christos, a northern Greek hotelier who, because he was "scouting" for business in Bulgaria, declined to give his full name."In Greece it's impossible to operate a business now," said Christos, a northern Greek hotelier who, because he was "scouting" for business in Bulgaria, declined to give his full name.
"Nothing is moving in the market. And with over 30% of bank loans non-performing no one will give you credit. You go to a bank and they refuse, point blank, to even talk about it." "Nothing is moving in the market. And with over 30% of bank loans non-performing, no one will give you credit. You go to a bank and they refuse, point blank, to even talk about it."
Greece is the third biggest investor in Bulgaria, after the Netherlands and Austria, with Greek construction firms leading the market in large-scale infrastructure projects in the former communist state.Greece is the third biggest investor in Bulgaria, after the Netherlands and Austria, with Greek construction firms leading the market in large-scale infrastructure projects in the former communist state.
The road up to Blagoevgrad from the Greek border is testimony to the emigration of the entrepreneurs. Lined with Greek language billboards and hoardings it is now home to companies exporting goods – anything from plastics to pharmaceuticals, olive oil and food – and textile factories and construction firms that have also relocated. Among them Fourlis Holdings, which owns the IKEA franchise for the region, the building firm Ellaktor and Jumbo, Greece's biggest toy retailer. Film production companies have also jumped on the bandwagon. The road up to Blagoevgrad from the Greek border is testimony to the emigration of the entrepreneurs. Lined with Greek-language hoardings, it is now home to companies exporting goods – anything from plastics to pharmaceuticals, olive oil and food – and textile factories and construction firms that have also relocated. Among them is Fourlis Holdings, which owns the Ikea franchise for the region, the building firm Ellaktor and Jumbo, Greece's biggest toy retailer. Film production companies have also jumped on the bandwagon.
A commercial officer at the Greek embassy in the Bulgarian capital Sofia said that over the past 18 months he had been deluged by "expressions of interest" from business people who saw Bulgaria as a safe haven and wanted to export goods to the country. A commercial officer at the Greek embassy in the Bulgarian capital, Sofia, said that over the past 18 months he had been deluged by "expressions of interest" from business people who saw Bulgaria as a safe haven and wanted to export goods to the country.
So, too, has Bianka Giorgieva, an accountant who has opened offices in Sandanski, the nearest commercial town to the frontier. "Every day we receive calls from at least two or three Greek companies wanting to set up shop here," she said. "At some point the demand got so great that I decided to set up a second office here." So, too, has Bianka Giorgieva, an accountant who has opened offices in Sandanski, the nearest commercial town to the frontier. "Every day we receive calls from at least two or three Greek companies wanting to set up shop here," she said. "The demand got so great that I decided to set up a second office here."
Small and medium sized businesses are not the only enterprises fleeing the eurozone's weakest member state. The past 18 months has seen the exit of Greek multinationals including Coca-Cola Hellenic Bottling, previously the country's biggest company but now headquartered in Switzerland and listed in London, and Viohalko, its largest metals processing group. Small and medium-sized businesses are not the only enterprises fleeing the eurozone's weakest member state. The past 18 months has seen the exit of Greek multinationals including Coca-Cola Hellenic Bottling, previously the country's biggest company but now headquartered in Switzerland and listed in London, and Viohalco, its largest metals processing group.
"Everyone is abandoning the Greek economy," said a political commentator, Giorgos Kyrtsos. "Everyone is abandoning the Greek economy," said the political commentator Giorgos Kyrtsos.
"The big fish are relocating to countries like Luxembourg, Switzerland and Belgium and small and medium sized companies that don't have the means, are moving to less developed Balkan states," he said, adding that the climate provided fertile ground for major international investors to impose their own rules. "The big fish are relocating to countries like Luxembourg, Switzerland and Belgium, and small and medium-sized companies that don't have the means are moving to less developed Balkan states," he said, adding that the climate provided fertile ground for major international investors to impose their own rules.
"The government might be selling its success story but in reality the economy is [at a] complete impasse. It's a crazy situation and the question that has to be asked is who the hell is going to stay in this country?" "Out of a fleet of 30,000 lorries, 8,000 have already moved to Bulgaria. If the government wants to keep companies here it has to resolve the issue of liquidity in the private sector and reduce the tax burden, otherwise who the hell is going to survive in this country?"