Historic centre, modern crises: on the textile and clothing trade in Thessaloniki

This audio recording is part of an interview with Mr. Vlachogiannis, vice president of the Chamber of Commerce and Industry of Thessaloniki, conducted in the summer of 2021. In the extract, the interviewee discusses the textile and clothing trade and the crises that have been afflicting commerce and manufacturing in northern Greece since the 1990s, focusing on the issue of bouncing or post-dated cheques, a phenomenon which, according to Vlachogiannis, had plagued the clothing and textile trading sector since the mid-1990s. To a certain extent, it was the practice of issuing bouncing cheques that led to mass business closures in the clothing production sector or, at the very least, caused a sharp drop in their turnover and profit rates.

In the interview extract, Mr. Vlachogiannis mentions that ‘the bouncing cheque was a scourge. Nowadays, the issuance of bouncing cheques has been substantially reduced. I would say it started because of some ineffective legislation and extremely aggressive policies on behalf of the banks in an effort to attract customers. This led to banks mostly accepting cheques without examining the customer’s creditworthiness. Since anyone who received a cheque could endorse it and the cheque would eventually make it to a bank as collateral, this mechanism increased cash flow, essentially creating a sort of currency.      

Supervising authorities, mainly the Bank of Greece, did not pay proper attention to the development of this phenomenon.  They should have hit the brakes on it as early as the beginning of the 1990s. Instead, it grew exponentially and when the whole thing collapsed, it caused a snowball effect. The biggest correction of this financial anomaly took place between 2009 and 2012. That’s when problems started piling up. In conditions of growth and expansion, the bouncing cheque, the post-dated cheque had a different function. But when things started spiralling out of control, making supervision by the Bank of Greece very difficult, the practice of the bouncing cheque showed another, ugly side and, in the end, we saw its ugliest side with the collapse which occurred in the three years between 2009 and 2012’.    

It was as early as the beginning of the 1990s when bouncing cheques started dominating conversations among businessmen in the clothing and textile trade. At the time, due to the fall of socialist regimes, Eastern Europe and the Balkans were emerging as a new locus of cheap labour. According to the demands of the European clothing market, the labour force in Greece was now considered to be driving the cost of clothing manufacturing upwards. Labrianidis mentions that, fortunately, due to the living conditions and the socio-political circumstances in Thessaloniki, ‘cheap labour was not promoted as a competitive advantage’.

In addition to this emerging network of global competition in the clothing industry, the Greek state stopped awarding export grants to local manufacturers/exporters. All these developments hit the clothing and textile trade in Greece particularly hard. During the 1990s, employment in the sector decreased significantly and soon the clothing manufacturing sector experienced a sharp drop in production output.

During this time, textile traders and manufacturers were left wondering whether their customers would be able to pay off their purchases, since sales preceded payments by an average of six months. For example, a shop would be supplied with stock for the winter season in autumn and pay off the supplier in spring. According to the interviewee, this discrepancy between time of purchase and time of payment rendered the clothing and textile trading sector particularly vulnerable to the impending crisis, a fact which became evident after 2009.

As a result, the optimism of the early 2000s, driven to a certain extent by the rising value of the Greek stock market, was succeeded by the emergence of fierce competition among third-party garment manufacturers in the European South and their counterparts in other countries who produced clothing at a much lower cost. These developments unfolded on the eve of the global financial crisis of 2008 and struck deep in the heart of the already foundering textile and clothing industry.