The economy may be growing—at rates even higher than the Eurozone average—yet a trend is emerging in the market of holding onto cash… just in case, reminiscent of the situations a decade ago.

Payment deadlines are, in many cases, being unilaterally extended well beyond the legislated 30 or 60 days for issued invoices, while VAT payments are still required within a month. This is creating a cash flow squeeze for supplier businesses.

Supermarkets, which control cash flow at the heart of the market, are paying suppliers as late as eight months, while even the state has reverted to old practices, now owing €3.4 billion! This is almost like the bailout era when the troika pressured governments to settle public sector obligations to inject liquidity into businesses and the market.

The evolving situation is triggering chain reactions in the market. Combined with rising operational costs for businesses and the retail sector’s recent recession in late 2024, it has contributed to an increase in bad debts.

A telling sign is the 45% surge in bounced post-dated checks in 2024. While the levels are not yet comparable to the financial crisis period, they are difficult to justify given the country’s economic performance at a time when Recovery Fund and EU financial support are at unprecedented levels.

The Public Sector

What’s paradoxical in this situation is that the state itself is leading the payment freeze, accumulating overdue debts now exceeding €3.4 billion.

These debts include unpaid obligations from hospitals, municipalities, construction companies, government suppliers, and outstanding tax refunds. Hospitals have the largest share, with debts reaching €1.318 billion. The 2024 budget included a €400 million allocation to reduce hospital arrears, but their debt continues to grow—standing at just €344 million at the end of 2019.

Next in line are Social Security Funds, owing €597 million, Local Government Organizations with €243 million in outstanding payments to third parties, and Legal Entities of the General Government, which owe private entities €194 million. Meanwhile, outstanding tax refunds have increased to €915 million.

This situation is almost surreal because the state does not face a liquidity crisis like during the peak of the financial meltdown. It has more than €47 billion in cash reserves at the Bank of Greece.

Yet, payments are delayed, making it clear that settling these debts is purely a political decision—especially since they are not extra expenditures but budgeted, approved, and voted on in Parliament!

Chain Reaction

This delay, as expected, ripples through the entire economy, triggering chain reactions: businesses awaiting payments from the state or large retail chains struggle to meet their own obligations, suppliers face mounting pressure, wages are delayed, and liquidity dries up in the market.

A significant portion of professionals now allocate their entire business revenues to paying taxes and social security contributions. While the state delays payments, it does not offset its debts against what businesses and citizens owe—it demands full tax collection, even maintaining advance tax payments.

As a result, businesses are paying VAT they haven’t yet received and taxes on accounting profits they haven’t actually collected. With taxes and social security payments draining liquidity, payments get delayed, and the market struggles—especially in the past three years, as operational costs have surged.

The Governor of the Bank of Greece, Yannis Stournaras, has repeatedly warned about this issue, urging the government to settle its debts on time. His concern is compounded by the widespread use of post-dated checks, which disrupt the flow of money in the market, limiting the central bank’s ability to control it.

At this point, everyone owes everyone for months—sometimes even a year. If, for example, the government fails to pay a construction company, the company cannot pay its subcontractors, engineers, workers, or material suppliers. Projects stall, delays lead to penalties and damage, and costs spiral. Engineers and workers struggle to pay their loan installments and rent, making ends meet difficult. The widespread sense of liquidity shortage is now palpable across businesses and citizens alike.

The Private Sector

Of course, this domino effect is not solely caused by the government but also by a significant portion of the private sector. One of the clearest examples is the relationship between organized retail and its suppliers.

Supermarkets, which receive immediate payments from consumers, drastically delay their payments to suppliers. The average repayment period for major supermarket chains is 90 days (three months), but in most cases, payments are made after 180 days (six months). The only reason the official average appears lower is that supermarkets comply with the strict 30-day payment rule for primary production products.

“Unfortunately, there isn’t a single supermarket in Greece that pays us in less than four months. There’s even a well-known chain that pays in eight months,” says the owner of a well-known snack company, who wishes to remain anonymous. “Essentially, we sell to them this year and get paid next year. That’s why we’re shifting our focus toward exports.”

The “lucky ones” who do get paid early—or ask for it—must accept an additional discount beyond the originally agreed price. In other words, they receive even less than expected. If they refuse, their products simply disappear from the shelves.

While supermarket delays have been a longstanding issue, a more recent phenomenon is the growing payment freeze in the broader retail sector, which officially entered a recession last year. According to ELSTAT (the Hellenic Statistical Authority), retail sales dropped by 5% in 2024.

Economic Pressure and Liquidity Crisis

“On one hand, declining sales for most businesses, and on the other, the sharp rise in operating costs over the past three years, have created a highly stressful situation for a large part of the commercial sector,” says Stavros Kafounis, president of the National Confederation of Commerce and Entrepreneurship, speaking to “THEMA.” “Liquidity, as recorded in our research, is now the dominant issue. That’s why I believe that unless something drastic changes, we will see significant shifts in the market this year and a general trend toward cutbacks,” he adds.

A well-known Athens-based merchant, who wishes to remain anonymous, explains that he is trying to gain some time by negotiating debt settlements with the state and issuing six-month post-dated checks to suppliers. *”Unfortunately, this is the new reality. We are searching for any possible leeway or solutions everywhere.

For example, most merchants now have to make consecutive payment arrangements—such as for VAT—so that they can redirect those funds to cover other financial gaps and ultimately survive,”* he states.

Rising Defaults

The worsening market conditions are clearly reflected in data from Teiresias (the Greek credit bureau): bounced checks increased by 45% in 2024, reaching €101.8 million, while unpaid bills of exchange rose by 3.84%, totaling €13.2 million. Altogether, bounced checks and unpaid bills of exchange amounted to €115.1 million last year, with a steep rise recorded since last summer.

This trend had already emerged in the latest Atradius barometer conducted in Greece last spring. According to the study, 10% of businesses surveyed expected bad debts over the next 12 months, compared to just 2% a year earlier.

Similarly, 49% of businesses anticipated overdue invoice payments, up from 35% the previous year. The proportion of businesses expecting on-time payments dropped to 41%, from 63% a year earlier. Moreover, 62% of Greek businesses now expect an increase in the number of insolvent customers.

The Global Perspective

However, this financial strain is not exclusive to Greece. According to the latest Atradius data, 2024 saw a 23% increase in bad debts, while business bankruptcies rose by 20% compared to the previous year. Countries like Germany, Spain, France, and Italy are experiencing a surge in insolvencies, exacerbated by rising interest rates and high energy costs.

Across Europe, the situation is further complicated by geopolitical instability, fears of potential new banking crises, and strict fiscal policies enforced by many governments. These factors are restricting capital flows and making business financing increasingly difficult.