The novel coronavirus has sent markets into a tailspin and forced the scrapping of many plans for this business year. Commercial law firms, their businesses closely tied to the way economies ebb and flow, have been forced to adapt. This global phenomenon is in some ways particularly poignant in Greece, which was finally, after a decade of darkness, showing signs of returning to the light. Commercial Greek law firms, excited about the prospects of a highly-anticipated economic recovery, have discovered they’ll have to wait just a little bit longer. Still, they insist, good times are just around the corner.
Early 2020 – Optimism Abounds
Hopes, at the beginning of 2020, were high. In 2019, Greece’s GDP grew by 1.9% – the third year of growth in a row, after almost a full decade of economic decline following the 2008 global financial crisis. The country’s unemployment rate dropped for the sixth year in a row, to 18.1%, from a high of 27.4% in 2013.
And the economic recovery of 2019 was “cross-sectoral,” says Alkis Mirkos, Counsel at Papapolitis & Papapolitis. “We had a lot of debt/equity deals, improvements in the tourism sector and the renewables sector, financial restructurings were booming, and M&A transactions showed a lot of promise.” He, like his peers, was confident as the new year began. “This all led us to believe 2020 would be like that too – and for the first few months, it did seem to be going that way.”
Panagiotis Tzioumas, Partner at Greece’s KLC Law Firm, remembers that hope well. “It seemed like, finally, our economy started taking a turn for the better, after almost a full decade,” he says. “We finally put the GDP dips that the economy had experienced behind us for good.” As a result, he recalls, “in January and early February, we expected there to be a lot of transactional work, investments pouring in, and foreign business coming in to position itself in Greece.” Indeed, he sighs, “we had a really good start to the year.”
Potamitis Vekris Co-Managing Partner George Bersis says he and his collegaues were similarly optimistic at beginning of 2020, and he identifies the political change in the country last year as part of the reason. “The current government is pro-EU, pro-investment, and pro-business, all of which inspired confidence,” he says, pointing to the uptick in FDI and the decrease in tax rates that followed the change.
This confidence fueled real hope going into the year, according to Bersis. “The crisis lasted for about 10 or 11 years, depending on how you look at it,” he says. “The rush of optimism after a great 2019 was something we couldn’t hide.”
Then the virus arrived.
The Other Shoe Drops
When stories about the virus first appeared, few imagined that what eventally became known as COVID-19 would be as problematic as it eventually turmed out to be. “Nobody considered it a threat until it was already here,” sighs Ioana Michalopoulou, Managing Partner of Michalopoulou & Associates. “There was widespread belief that it would not hit Europe or Greece.”
But hit it did, in March of 2020. The results, Alkis Mirkos says, were immediate and dramatic. “Our economic outlook was impaired. The tourism sector – one of the pillars of our economy – was struck, the SME sector was hit hard, the NPL market seemed to be growing. It looked grim.”
Unlike those in some other countries, the Greek authorities acted with impressive speed to enforce necessary social distancing and enact other useful public health measures. “Restaurants, cafes, shopping centers closed, public gatherings banned – this prevented the spread,” says Panagiotis Tzioumas.
“Our government responded very quickly and very well,” Alkis Mirkos agrees, “tackling the health crisis and introducing a lockdown to save lives.”
“The early shut-down, a proactive government with a strict approach that didn’t want to wait for things to happen in order to react to them,” George Bersis reports. “This was the key to preventing this from spreading fast and spreading deadly.”
The facts bear this out, as Greece was able to keep the infection rate and death count substantially lower than many of its neighbors. [See “COVID-19 Hits Europe” Box on page 32]. As a result, on June 15, 2020, Greece became among the first European countries to reopen for tourists.
The Greek response involved more than critical public health measures, of course, and the economic measures the Greek government put in place to help businesses survive the crisis, including a stimulus of about EUR 24 billion, were valuable as well. “Stimulus measures for the economy, very similar to those that have been taken elsewhere in the region, like supporting enterprises, SMEs, workers, providing easier access to financing, reducing bureaucratic hurdles for citizens – all of these helped,” says Mirkos. “Principal repayment for bank loans was suspended, interest payments were subsidized, some taxes were deferred, and the Capital Market Commission took steps to prevent manipulation.”
In the meantime, the crisis has allowed the government to implement long-awaited improvements, Berisis reports. “Some things that had been put off for years were done in a manner of weeks,” he says. “The Government transformed itself in many aspects, mostly with the introduction of electronic communications with administrative and regulatory bodies – this will save a lot of time.”
While the government’s quick responses drew across-the-board praise, it appears not all sectors went into the deep freeze to begin with. According to Bersis, the Construction sector remained active during the crisis, and he reports that hopes remain high that the 2020 summer season will not be lost altogether for tourism. “Not a lot of cancellations for August onwards happened, nor a lot of dismissals and layoffs,” he says. “This inspires people to remain optimistic, but we’re not at the point of a ‘new normal’ yet.” Especially, he warns, because the real costs to the economy may not be visible until the second half of the year, as the country reopens. “We will likely see a rise in bankruptcies and restructurings, as business sectors struggle to get back on track – but we have to wait and see what will happen before we can make any predictions.”
Nonetheless, nobody would describe the effect of the pandemic on the Greek economy as anything but unfortunate, and the International Monetary Fund predicts a 10% reduction in Greek GDP for 2020, compared to only 8% in Spain, 9.1% for Italy, and 5% for Turkey.
The Best Laid Plans
Although the consequences of the COVID-19 crisis for the Greek economy were dramatic, business remained fairly good for at least the larger Greek law firms. At the end of the day, Ioana Michalopoulou says the worst fears didn’t materialize, although she thinks her firm’s specific focus may be part of the reason why. “To tell you the truth,” she says, “we haven’t been impacted nearly as badly as we thought we would be. But our business is mostly consultancy in the area of the health law – which has boomed.” The firm’s litigators were able adapt to the closing of the courts as well, she says, insisting that, as a result, if anything, the firm has been doing more work than before. “Clients thought that because we were home we were always available,” she laughs, “so we were on call 24/7.”
Although larger firms were able to adapt, Panagiotis Tzioumas suggests, smaller firms and boutiques may have had a harder time of it. “While most major firms were able to switch to a remote-based working environment,” he says, “smaller firms have probably struggled more.” Especially because, outside the Health Care/Life Sciences world, there was a noticeable slowdown in many sectors of the economy. “We still have no idea how the crisis will impact many areas of business and we have to wait and see if July brings more developments.” Smaller firms, working on smaller margins and often being less flexible, with a lower degree of tech readiness, may be more impacted.
Ultimately, that “flexibility” is key, Alkis Mirkos insists – primarily the ability to provide remote work opportunities. “Law firms were quick to regroup – those that could, at least,” he says. “We were the first to make the transition to working remotely, in order to protect our colleagues’ health as well as that of their families.” He reports that Papapolitis & Papapolitis has, since May 6, moved to a rotation-based system combining remote and office work, and is keeping up with the workload.
And Mirkos insists that the results have been positive. “We have been just as efficient, if not more,” he says with a smile, though he adds that of course working from the office has its advantages, especially “making things easier in terms of teams coordinating and planning their work face to face.” He points out that, ultimately, it was less of a change than might be expected anyway, because transactional work is “a never-stopping game by its nature,” so it was not uncommon even before the crisis to work nights, weekends, and even on vacation.
George Bersis admits that he was very skeptical about the concept of remote work at first. “I didn’t think that people would be as diligent and transparent while working from home,” he laughs. “Boy, was I wrong.” In fact, he says, “people responded fantastically,” and he claims that Potamitis Vekris is actually seeing a surge in efficiency. “We have, since, opened up the office in a limited capacity – but we’re discouraging people from coming in and are incentivizing them to get more distance and work more from home.” A convert, now, Bersis says that they are likely to encourage remote work even after the crisis ends. “We’re probably going to support it more. It saves time commuting, allows for more freedom in planning your day, it’s good for the environment, and it’s good for mental well-being as well.” The result, he says, is a kick-start into the future. “It would’ve probably taken the legal market an extra ten years to get to this point, so this is definitely a silver lining of the crisis.”
Tzioumas agrees with Bersis that working from home is likely to remain a more common option in a post-COVID-19 world. “This could, in a way, be a good legacy of the whole ordeal,” he says. “This could be a permanent feature of our work. Even schools are digital and remote now!” he says, smiling as his daughter walks in the room, fresh from an online class.
Ioana Michalopoulou takes the issue of working from home, and expands it to encompass a greater overall transformation. “The entire legal profession is on the verge of a very transformative change,” she says. “We’re getting court decisions by email, we can sign documents electronically, and file documents electronically – this was a pipe dream two months ago!” This change benefits all lawyers, she insists, the younger ones perhaps most. “The hybrid remote-office system is a unique opportunity for the newer generations to excel,” she says. “They are mostly digital natives and do not require further education in order to adapt – unlike some of the older generations of lawyers.” She believes that one way to adapt to the new normal could be to “hire people to work remotely, straight from their homes – if the legal profession can overcome its structural rigidities and the propensity towards office work.”
Wherever they work from, and whatever their age, the assumption of most in the Greek legal market at the beginning of the year was that they would be growing, and adding staff. Many firms, in fact, had recent done so, when COVID-19 attacked the economy.
Michalopoulou describes a “hiring craze” at the beginning of the year. “People hired more because it seemed like we were at the end of the tunnel before all of this. Now, with cuts in spending and performance – hirings will be influenced as well.”
Tzioumas says that the KLC Law Firm, like many other prominent firms, expanded at the beginning of the year, expecting a great 2020. He sighs, noting that “our expansion plans shall now be reconsidered depending on the impact the unexpected arrival of a global pandemic will have on our work and revenues.”
“At the beginning of the year, businesses were under capacity in terms of staff – a lot of work was there to be done so hirings were a normal occurrence – and a frequent one at that,” Bersis says. Still, while he concedes that hiring has slowed in the last few months, he’s not particularly worried about long-term consequences. “The next few months are not likely to see a lot of new hirings, but after that… we’ll have to wait and see, but I think that we’ll see an uptick!”
None of the firms we spoke to reported lay-offs, and Bersis is almost offended at the idea, explaining that “Potamitis Vekris has around 85 fee earners – these are people we invested heavily in, provided them with education and training for years – we cannot let them go just because there is a virus.”
Mirkos is a bit more cautious, claiming that it may be “a bit too optimistic” to hope that there will be a hiring wave in the back half of 2020, but he also notes that the Greek market “has no structural weaknesses,” and that the economic measures taken to protect jobs “will greatly help.” According to him, “if things continue in this vein the optimism that coursed through us just a few months ago – could be back for 2021, and we might see more hires.”
Hope Springs Eternal
COVID-19 shook up a lot of plans Greece had at the beginning of what looked like a great year. It seemed that finally, after almost a decade of economic turmoil, the country was going places, but the pandemic put much of that on hold. However, timely governmental response and the flexibility with which legal professionals were able to respond to the new realities minimized the crisis’ effects.
At the end of the day, most commercial lawyers in Greece see the COVID-19 crisis as an unfortunate delay in an inevitable recovery, rather than something longer-lasting and pernicious. Mirkos, enthusiastically, describes “some good heralding signs – we’ve seen forecasts of 7.9% growth in 2021 – so if nothing catastrophic occurs, we could be back on track next year.”
In the meantime, people are keeping their focus on what’s most important. “So, looking ahead, the first thing for us still remains – protecting our families and their health and lives,” Tzioumas says. “After we do that, all is good.”
This Article was originally published in Issue 7.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.