With banks closed, un­sold eggs point to deeper woes

The Washington Post Sunday - - FRONT PAGE - BY AN­THONY FAIOLA

avlona, greece — The morn­ing’s fresh eggs were loaded and ready to ship when chicken farmer An­ge­los Ka­ly­vas slid open the side door on one of his half-empty de­liv­ery vans.

“Not good,” said the 52-yearold, sur­vey­ing the in­te­rior. On one side, eggs in car­tons were piled high. On the other, noth­ing. “Or­ders are go­ing down. Down. Down. Down.”

In a coun­try in the midst of a new and ugly phase in its 51/ 2- year­long debt cri­sis, Ka­ly­vas Es­tate eggs have be­come an un­likely barom­e­ter of life in a non­func­tional econ­omy.

Since Greek banks were shut­tered June 29, the sec­ond-gen­er­a­tion egg farmer has seen busi­ness drop by 30 per­cent. He’s still selling out of his own hens’ daily pro­duc­tion of 5,000 eggs but has cut back on re­selling from whole­salers, some of whom are rac­ing to find buy­ers be­fore stocks go bad.

Cash- and credit-starved su­per­mar­kets, he said, are re­duc­ing

their in­ven­to­ries. “If they run out of eggs, they run out of eggs.” For some trou­bled bak­eries, it’s now ei­ther eggs or flour. “And they’re go­ing to go with flour,” he said.

Just as prob­lem­atic is a cri­sis in pay­ments. With tight con­trols on fi­nan­cial trans­ac­tions, Ka­ly­vas has to cover his daily costs in hard-to-find cash, lead­ing him to de­mand pay­ments in cash, too. It’s money that many of his clients sim­ply don’t have.

“If we don’t get a deal with Europe . . . Greece is doomed,” Ka­ly­vas said. “But even if we do, things are not go­ing to get bet­ter fast.”

Greece and its Euro­pean cred­i­tors failed to agree Satur­day on a plan aimed at win­ning this na­tion its third bailout pack­age since 2010, with the re­gion deeply di­vided over a res­cue and sev­eral na­tions call­ing for more ef­forts by Athens be­fore fi­nal ne­go­ti­a­tions can be­gin. Any agree­ment will mean years more of painful aus­ter­ity, but fail­ure to reach one soon could be worse — trig­ger­ing a quick col­lapse of the Greek fi­nan­cial sys­tem and its likely exit from the 19-mem­ber euro cur­rency union.

Yet even if a deal is struck, Greece could, for a pe­riod, re­main some­thing akin to a fi­nan­cial zom­bie state. Al­ready, Greeks can­not down­load cer­tain cell­phone apps or buy songs on Ap­ple’s iTunes, be­cause the cap­i­tal con­trols im­posed two weeks ago bar in­ter­na­tional trans­ac­tions via Greek banks.

As of last week, 29 in­ter­na­tional air­lines stopped ac­cept­ing reser­va­tions from Greek travel agen­cies be­cause of doubts they could cover the costs of booked tick­ets. Pantelis Avramidis, chief ex­ec­u­tive of premier beer maker Elixis, said he is stuck with 1,381 gal­lons of beer in vats on his fac­tory floor be­cause he can­not trans­fer money to his Ital­ian bot­tle sup­plier. In two weeks the batch will spoil.

“I’m 50. I’ve worked all my life. I’m a self-made en­tre­pre­neur,” Avramidis said. “I’m run­ning out of time to start over, and I’m afraid I’m run­ning out of cash as well.”

If Greece’s cred­i­tors do not open the door to a new bailout this week­end, the big ques­tion re­mains whether the Euro­pean Cen­tral Bank will agree to in­crease liq­uid­ity for Greek banks Mon­day. If it does, banks here could re­open as soon as Tues­day, po­ten­tially al­low­ing lim­ited fi­nan­cial trans­ac­tions to restart. If it doesn’t, cap­i­tal con­trols could be tight­ened rather than loos­ened in a bid to pre­vent Greek banks from col­laps­ing.

Yet even if a bailout deal comes to­gether and the ECB jumps in to aid Greece, some lim­its on bank with­drawals and trans­fers are likely to re­main in place for at least two months, Greece’s econ­omy min­is­ter, Ge­orge Stathakis, told lo­cal tele­vi­sion on Satur­day. Some an­a­lysts pre­dict such con­trols could linger even longer, cit­ing the re­cent bank­ing cri­sis in nearby Cyprus that saw such mea­sures ex­tended for two years.

“The ques­tion is how long it takes to re­store con­fi­dence in the bank­ing sys­tem,” said a se­nior Greek bank­ing of­fi­cial, who spoke on the con­di­tion of anonymity, given the sen­si­tiv­ity of the is­sue.

Faced with ex­treme un­cer­tainty, the econ­omy here has gone topsy-turvy. Greeks are lim­ited to ATM with­drawals of 60 eu­ros — about $66 — a day. But they can use their bank debit cards to spend more, up to their daily limit, at stores that ac­cept them. Some Greeks fear that the money in their ac­counts could be seized and de­val­ued into a new cur­rency if no deal is reached with Europe, so they are rush­ing to spend what’s there. That means a buy­ing spree of big-ticket, im­ported items such as wash­ing ma­chines, com­put­ers, even Chanel bags.

But Greeks are largely for­go­ing more run-of-the-mill pur­chases— leav­ing stores such as Paul Pa­paniko­laou’s bed­ding shop in cen­tral Athens bat­tling sales drops of 90 per­cent since the cap­i­tal con­trols hit. Just as well, be­cause with­out the abil­ity to make in­ter­na­tional bank trans­fers, he said, he is un­able to bring in fresh stocks of sheets and tow­els from his sup­pli­ers in China and Pak­istan.

“Ev­ery­one is try­ing to fig­ure out how long they can last un­der these con­di­tions,” he said. “It de­pends on when banks re­ally open fully again. A week? Two weeks? With­out some kind of nor­mal sys­tem, some busi­nesses won’t last a month.”

Most painful for busi­nesses such as Ka­ly­vas Es­tate is that af­ter years of set­backs, things had fi­nally be­gun look­ing up be­fore this latest cri­sis.

Founded by his fa­ther, the com­pany went from tiny pens of handfed chick­ens in the 1950s to a mech­a­nized egg farm in the 1980s. Af­ter Greece adopted the euro in 1999 and credit be­came more ac­ces­si­ble, Ka­ly­vas made fur­ther in­vest­ments, in­stalling a re­frig­er­ated room by his ivy-cov­ered hen­house to keep eggs fresh longer.

Af­ter Greece slipped into its debt cri­sis in 2010, busi­ness fell 50 per­cent, he said, as su­per­mar­kets con­sol­i­dated and other clients turned to far cheaper eggs from neigh­bor­ing Bulgaria. But last year, as Greece’s econ­omy found a pulse, so did his busi­ness. He felt con­fi­dent enough to in­vest in a $350,000 ex­pan­sion that would have boosted his pro­duc­tion by a third.

“Things were get­ting bet­ter,” he said, look­ing at the empty row of hen­houses he had in­stalled two weeks be­fore the bank clo­sures. He can­celed his or­der for the chick­ens to fill them af­ter cap­i­tal con­trols went into ef­fect.

“These kinder­gart­ners run­ning the coun­try re­ally messed things up,” he said.

The chal­lenge now is how to carry on with nor­mal busi­ness in a non­func­tion­ing fi­nan­cial sys­tem. On Fri­day, Ka­ly­vas chainsmoked and nursed a Coke as his sales as­sis­tant worked the phones.

“I’m call­ing this client, be­cause I know he pays in cash,” said the as­sis­tant, Anas­ta­sia Ber­doli, 46. But af­ter a brief ex­change, it’s no sale. The client hadn’t sold all the eggs he or­dered ear­lier in the week.

Greeks are al­lowed to make do­mes­tic online bank trans­fers. But many busi­nesses here never set up In­ter­net bank­ing ac­counts, and oth­ers don’t trust them, see­ing the money locked up in their ac­counts now as be­ing of du­bi­ous worth. So while cash is at a pre­mium in Greece, it is also king.

Doesn’t Ka­ly­vas know it. For months, he and his 46-year-old wife had been pay­ing a doc­tor for fer­til­ity treat­ments as they tried to have a baby. But the doc­tor is de­mand­ing cash, so they have, for now, sus­pended the ses­sions. Ka­ly­vas has enough feed — largely soy and corn im­ported from the United States— to feed the chick­ens through the end of the month. But his sup­plier is de­mand­ing cash for next month’s sup­ply. If they can’t reach “an ar­range­ment,” Ka­ly­vas said, he may be forced to slaugh­ter some of the chick­ens to sell as meat.

Yet amid the crazy in­se­cu­rity of Greece right now, he said, he could un­der­stand the de­sire to be paid in some­thing you can hold in your hand. He’s selling to some old clients on ac­count, hop­ing they can pay him when the banks re­open. But he has cut off some clients who can’t pay in cash. “There is only so much risk you can take,” he said.

An hour af­ter his as­sis­tant fin­ished her sales calls, she came to Ka­ly­vas with good news: a Mon­day or­der for 3,000 eggs on the Greek is­land of Crete. It was more eggs than he had on hand, so Ka­ly­vas rang up a sup­plier in Athens, an hour’s drive south.

“I need eggs,” he told the whole­saler. “Can I trans­fer the money into your ac­count? Any bank you wish.” No, he is told. Cash only. “Okay, okay,” Ka­ly­vas said re­luc­tantly. “Cash.”


TOP: Since Greek banks were shut­tered June 29, sec­ond-gen­er­a­tion egg farmer An­ge­los Ka­ly­vas, 52, has seen busi­ness drop by 30 per­cent. He’s still selling out of his hens’ daily pro­duc­tion of 5,000 eggs but has cut back on re­selling from whole­salers. MID­DLE: Ka­ly­vas has enough feed for his chick­ens through July. But his sup­plier is de­mand­ing cash for next month’s sup­ply, and Ka­ly­vas may be forced to slaugh­ter some of the chick­ens to sell as meat. ABOVE: A lo­cal res­i­dent buys eggs at Ka­ly­vas Es­tate.

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