A significant increase in the interest rate of loans to be granted to small and medium-sized enterprises under the Recovery Fund will arise after the government's decision not to exclude the loans from a charge arising from a 1975 law imposed on all credit (except mortgages).
Banks had recommended the exclusion of Recovery Fund loans from the charge that was imposed during the country’s dictatorship and then turned into a tax. The aim of the banks' proposal is to keep interest rates as low as possible. It is noted that the philosophy of the Recovery Fund is, through European grants, to offer companies very low interest loans for investments. With the help of the Fund a very large company, with a high credit rating, could borrow money at even 1%, however, the final interest rate will be 1.6%, ie 60% higher, due to the imposition of the levy of 0.6% in favor of the Greek State.
In fact, the charge is a wider problem for domestic companies, banks and the economy as it drastically burdens the cost of money, leading to an increase in the final interest rate by 10% to 40% in most cases. The cost of borrowing in Greece remains disproportionately high compared to other European countries, creating a significant disadvantage for businesses.
Yesterday, the Minister of Finance, Christos Staikouras, called on banks, in comments to a parliamentary economics committee, to upgrade systems on collecting information and data, quantitative and qualitative, in order to price the loans more correctly "in order to reduce the - indeed - high borrowing costs, which are high, especially compared to other countries, the net interest income of banks."
However, a major factor in determining the cost of money is the state levy that was initially imposed in 1971 on certain categories of loans by the junta, extended in 1975 horizontally to all loans and substantially turned into a tax in 1991.
It is noted that in no other European country is there is a corresponding contribution, which disproportionately increases the cost of borrowing, while also creating a large administrative cost for banks, which are required to collect the tax and return it to the state. Banks, companies and businesses have been pushing for the abolition of the levy for decades, stressing that it is a tax that disproportionately burdens borrowing costs.
The levy from the 1975 law can only be avoided by Societes Anonymes, which have the ability to issue bond loans. All bond loans, whether listed or not, are exempt from the 0.6% levy, which explains the massive shift of large companies to this source of financing.
However, small and medium-sized enterprises do not have the ability to issue bonds in order to avoid the levy. At a time when small and medium-sized enterprises are under multiple pressures, not only are there no initiatives to substantially strengthen them, but anachronistic regulations are being maintained that disproportionately burden their financing costs. Even a young self-employed professional who buys an office to work from is charged with this contribution.
YIANNIS PAPADOGIANNIS
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