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  Issue Date: 2 / 2017  

Grexodus to Bulgaria

Bill Donahue

Photo from a visit to ELVO, the semi-private, semi-public wing of the Greek government that makes military vehicles and allegedly owes ~€500,000 to GAL, the crane makers at the center of our story. [The author] spoke to some people there and Elvo’s position, essentially, is, “We don’t have any money so we don’t owe them any money.” / Image Credit: Bill Donahue Click image to enlarge.

       It all began so innocently, and with such hope. In 1948, when George Lilias was 12 years old, he left his little farming village in northern Greece and went to the big city--to Thessaloniki--to seek his fortune. He found an apprenticeship at a factory that made construction equipment. The job was unpaid. George supported himself by selling paper cups of drinking water to city bus passengers. He went to night school. But what he loved most was his work at the factory, for he was involved in something momentous: He was making hydraulic tippers for cement mixers--for the very trucks that would rebuild the Greek roads and bridges the Nazis had ruined during World War II. He was also honing an entrepreneurial streak: In 1960, George and two friends would start making his own tippers. In 1976, as a sole proprietor, George would launch into uncharted territory, becoming, by his own reckoning, the first-ever Greek company to manufacture cranes.
        GAL, short George Apostolos Lilias, was such a success that after George fathered two sons--Apostolos in 1968, Nikos in 1969--they joined him. As boys, they swept floors in GAL's factory. As young men, they earned engineering degrees--and then grew the business. Apostolos was the withdrawn thinker behind the equipment design, Nikos the kinetic marketeer who expanded the company’s sales reach outside of Greece, finding clients in Lebanon, Saudi Arabia, and South Africa as he also cultivated GAL's most lucrative liaison, with ELVO, a public/private Thessaloniki-based venture that makes heavy duty vehicles, mostly for the militaries of Greece and Cyprus.
        By 1995, when George retired, GAL was based in a 12,000 square foot Thessaloniki factory that George had built himself. It had ten employees. Sometimes the welding machines ran all night.
        But between 2011 and 2014, amid the Greek economic crisis, GAL lost an alleged $600,000 in a single business deal. Throughout most of 2012 it had no almost no work. GAL grossed about $900,000 in 2015, but by then Greek businesses were taxed at a rate of 40 percent. They were obliged to pay 100 percent of their tax burden in advance each year.
        Nikos, who is now 48, grew discontent. Every time he flicked on the TV in 2015, there was Greece's young, charismatic prime minister, Alex Tsipras, saying he would heal the economy. "Liar," Nikos thought. He hatched an escape plan. He would relocate GAL, to a new promised land of low taxes and infinite opportunity. He would move, yes, to Bulgaria.
        Bulgaria. Dig deep now. Remember: Bulgaria is that cragged green ex Soviet state that sprouted an unseemly number of Olympic gold medalist weightlifters during the Cold War. Bulgaria, population seven million, is Europe's poorest nation and also (according to Transparency International) its most corrupt nation. But it is now, weirdly, having its moment as a Mecca for striving Greek entrepreneurs eager to flee the havoc at home. Big Greek companies can dream of moving to Germany or England. But for the little guys, escape has more often meant a skipping across a single international border, to struggling Bulgaria, where businesses taxes stand at about 10 percent and where labor costs are roughly half what they are in Greece.
        According to the Embassy of Greece in Bulgaria, 17,000 Greek companies now hold business licenses in Bulgaria, and the number seems to have risen sharply since mid-2015, when Tsipras elected to bar all Greeks from withdrawing more than $65 a day from the bank. Collectively, according to the Greek embassy, 53,000 Bulgarians are employed by Greek companies. In 2016, they yielded about $3 billion for the threadbare republic.
        There are a few large Greek operators in Bulgaria. Coca Cola Hellenic, which distributes soft drinks to 26 countries, relocated to the Bulgarian capitol, Sofia, in 2013. But mostly it's been smaller enterprises—clothing manufacturers, for instance, trucking dispatchers, and food processors: companies so small and humble they don't have websites or even signs outside the building. Many are in Sofia, but an equal number are in the southeastern corner of Bulgaria, and that is where I found Nikos Lilias on a cold morning last March. He was in the village of Marikostinovo, sitting on a new couch beneath fluorescent tube lights in GAL's new factory, a vast warehouse where the smell of paint was still fresh.
        Nikos is lean, with tousled black hair and a boyish grin. Though he has flecks of white in his beard, he exudes the scruffy, vaguely dialed air of a college student who's just pulled an all-nighter. He was ecstatic about having moved north. “Bulgaria reminds me of Greece 20 years ago,” he said. “Everything is just more human here. When you walk down the street, people say, ‘Good morning.’ They don’t treat you like a stranger.”
        Nikos added that ever since GAL moved to Bulgaria, in January 2016, the sale prospects have brightened. “When we went to a convention in Saudi Arabia recently,” he said, “everybody reacted positively to the name of Bulgaria. Greece is known for holidays and feta cheese, but Bulgaria?” His voice dipped a notch, attaining an ebullient manliness. “Bulgaria has a history as an industrial country.”
        Nikos and his wife live in Bulgaria now, in Sandanski, a tourist town abounding with hot springs and spas. He misses his CrossFit class in Thessaloniki. “But it’s okay,” he said. “I can run. There are swimming pools here.” He acknowledged that there is corruption in Bulgaria, but he added, "I haven't faced it yet, and I've already seen it in Greece anyway."
        What about the limited freedom of the press in Bulgaria?
        "It's not a problem for me," Nikos said. "I don't watch Bulgarian television."
        Eventually, we wandered out onto the cavernous production hall. Nikos told me that in time GAL would have 30 employees at work here, 20 of them Bulgarians who would be delighted to get $470 a month. For now, though, the move was ongoing and the factory largely vacant but suffused with a happy sense of calm. When a young Greek welder--we will call him Konstantinos--came striding toward us, he rejoiced over joining Nikos in Bulgaria. “The skiing here is excellent,” he said, “and this village, it’s quiet. There is fresh air.” He breathed deeply and a dreamy look seeped into his eyes. “When it is warmer,” he added, “I am going to plant a garden.”
        Bulgaria has become a garden of Eden for GAL because Greece was hell--a hell whose depth you can only understand if you know how GAL's one-time preferred client, ELVO, became, over several years, a sour enemy. The saga began in 2011, when GAL signed an $831,000 contract saying it would make ELVO 162 cranes for Cyprus Army trucks. Even as the deal was negotiated, Nikos was dubious. ELVO was bleeding money and many of its 3,000 workers had very little to do. It was a microcosm of the bloated Greek government, which employs about 600,000 people, or more than five percent of the population. But Nikos says ELVO's purchasing manager told him, "Don't worry. You will get paid."
        "I listened to him," Nikos says. "He was a close personal friend."
        Soon--as ELVO's private partner, a Greek company called Mitilineos, disinvested from the sinking vehicle maker--GAL began making the cranes for the Cyprus army. It made about 15 cranes. It received no money for these cranes. It took ELVO to court in and (this was a minor miracle, given the state of the Greek economy at the time) in 2013 it leveraged about $60,000--full payment--out of ELVO.
        At that point, GAL ceased work on the Cyprus Army cranes, right? Wrong, for another thing must be understood about GAL: Even though it is a high tech enterprise, rendering its machinery on software accurate to within one one-thousandth of a millimeter, it is at bottom a company founded on hope. It's a family thing. It began with a boy selling paper cups of water on the street and it grew.
        In 2013 and 2014 GAL worked on, and at least partially completed, 100 more cranes for the Cyprus Army. Meanwhile, ELVO sputtered. In 2013, finally, the tripartite committee that is now sternly setting economic rules for Greece—the infamous “troika” consisting of the European Union, the International Money Fund, and the European Central Bank—decreed that ELVO needed to thin its workforce and liquidate. A subsequent court ruling held that none of ELVO’s creditors could seek payment until the company had finished selling off its assets, which include a gargantuan 67-acre factory; a low-slung, fifties-era office building appointed by ancient gray drinking fountains; and spare parts for myriad military vehicles that are no longer made.
        ELVO is still having difficulty unloading its assets. Meanwhile, as GAL awaits payment, the Liliases are hanging on to the crane parts they made for ELVO. They're stored at GAL's defunct Thessaloniki plant, which sits just a little over an hour from Marikostinovo. I traveled down there one day and met Niko's brother Apostolos, who is clean shaven and bespectacled. He led me across the weedy lot and then threw open the shed door to reveal two dozen giant crane arms stacked in the dark. "Legal evidence," he said. "We made these but were never paid for them."
        The crane arms were rusted. They were never going to be used. Hanging onto them struck me as peevish, but I didn't say anything and the next morning, a Tuesday, I took a cab out to ELVO, on the outskirts of Thessaloniki. It was 9:30 am. when I arrived, but the the corridors were desolate, tomblike, even though ELVO still employs more than 3,000 people. "There is not enough work to do here,” publicist Charikleia Karameri told me, gesturing at empty desks. “We try to give people tasks like cleaning the premises, but it is hard."
        Karameri did not dispute that GAL did unpaid work for ELVO, but she said that ELVO accepts no blame. In its work for the Cyprus Army, she explained, ELVO was reliant on a German firm to make the trucks’ chassis—and that company ceased production, mid-project, afraid that ELVO’s guarantee of payment, backed by a Greek bank, was worthless. The Cyprus Army, in turn, said it wouldn't wait forever for the trucks, and in late 2013 it backed out of the deal. “What we were supposed to do?” Karameri said. “Buy all of GAL’s cranes for our own use? Where would we put them? And how could we pay for them? Nobody paid us.”
        "GAL didn't have to produce all those cranes," she added. "That was their choice. It is not on us."
        Soon we strolled over to ELVO's factory, a high-ceilinged hangar-like structure. We walked amid myriad rows of 30-foot-high shelves and we beheld 11 tan camouflage cargo trucks bearing GAL cranes. A slender, silver-haired security guard in a long black trench coat served as our escort, discretely walking a few yards ahead of us, his hands clasped behind his back and his head bowed. The scuff of his feet echoed in the silence.
        As spring wore on, Nikos continued to mastermind the move into the Bulgarian plant. He was a little worried because now because an Austrian client was stiffing GAL, refusing to make good on a $25,000 contract. Meanwhile an expected $225,000, coming from an EU grant program, was slow in arriving. Nikos postponed the delivery of a lathe and a boring machine.
        Nearby, other Greek companies infiltrated Bulgaria, in curious ways. In Marikostinovo, a young inventor/engineer named Stefano DaUlka launched a small shop that would make custom kitchens and refrigerators. He'd had just invested $1.7 million of his own money in startup costs (businesses loans are rare in impoverished Bulgaria), but it was worth it, for the kitchen business was a stepping stone. In time, DaUlka said, he would bring to market "an engine that produces electrical energy." The device would incorporate "a totally new aspect of how we see energy," he said, without elaborating.
        In Sofia, I arranged to meet with Greek emigre Ioakeim Kalimaris, the CEO of the Sofia-based Kalimaris Group. Kalimaris, 40, specializes in property management and also conducts a remunerative, albeit controversial side business: helping Greeks establish dummy Bulgarian companies—that is, enterprises that do absolutely nothing—simply so they can register their cars for cheap in Bulgaria. He is a wealthy man who seems to inhabit a shadowy world. On Facebook recently, he reported that he was followed one night by a thug. "A lot of people owe me money," he wrote. "I fear for my life."
        In advance of our meeting, Kalimaris sent a dapper and muscular young driver, a one-time Bulgarian Tae Kwon Do champion, to fetch me at my hotel. At Kalimaris headquarters, the driver ushered me into a glass-encased conference room, and there I waited a full hour as the CEO’s comely assistants supplied me with coffee, water, cookies and, finally, thin Cuban cigars. When Kalimaris at last appeared, he defended his side business in florid terms. The Greek taxation system constitutes, he said, “a war against humanity, and humanity is the most ancient of Greek ideals. It goes back to Aristotle, to Plato. And how do you bring it back?” Kalimaris arched his eyebrows, with sneaky exuberance. “You don’t go through the door. You go through the window.”
        Eventually I spoke to Greece’s Secretary General for Strategic and Private Investments, Lois Labrianidis, and he decried the “tax evaders” who he says are ubiquitous in the Greeks-to-Bulgaria mix. Of the 11,000 Greek-owned companies that sat in Bulgaria at the end of 2014, Labrianidis said, 9,000 had no employees; six thousand recorded no economic activity.
        The Greek Secretariat of Public Revenues regards dummy Greek businesses as "outright illegal," according to spokesperson Nectarios Nectos. "There are criminal sanctions," he told me. But Nectos refused to name of a single tax dodger who's actually been punished, and as Labrianidis sees it, over-the-border tax evasion is inevitable and perhaps unenforceable. "Even in crisis," he said, "Greece is far wealthier than Bulgaria, and when you have two neighboring countries with large developmental differences, you're going to have people crossing the border to buy petro, to exploit the lower-paid workforce. It's just a race to the bottom."
        A hint of sanity will only come, Labrianidis believes, if the EU "homogenizes the tax system, the VAT, and the social security. That's at least a step forward." In the meantime, as Bulgaria remains a poor cousin, Greeks who relocate there will only be deluding themselves, Labrianidis believes: "Just having low taxes doesn't make Bulgaria a paradise."
        Labrianidis notes that soon after the fall of the Berlin Wall--roughly from 1995 to 2005--a first wave of Greek textile companies flocked to Bulgaria, as well as to other poor ex Soviet states like Romania and Albania, lured by the cheap-as-dirt labor. Recently, four such companies approached him, eager to return to Greece. "Their clients weren't satisfied with the quality of the products made in Bulgaria," Labrianidis says, "and these companies were all scared of big labor strikes. There was a fear that Bulgarian-owned rival companies could manipulate the unions to strike in the Greek companies, but not the Bulgarian ones. They wanted a less hostile work environment."
        George Lilias has no role in GAL these days. He gardens mostly, and sometimes he goes into GAL's old Thessaloniki plant to do projects. One day I found him in there, in the cool darkness, at a workbench, welding an industrial strength napkin holder, a gift for his wife. Later, Apostolos told me that he and Nikos have not shared their financial travails with their dad. "He's old," Apostolos explained. "He deserves peace."

The place embodies the Greek dysfunction that is compelling companies to flee to Bulgaria. In 2014, the troika forced it to liquidate and cut its staff, which included about 375 people, and ELVO has failed to do either of these things. It still has 340 people on its payrolls, and as you can see from these pictures, taken on a Tuesday morning at around 10:30, almost none of them come to work. There is no work to do. / Credit: Bill Donahue Click image to enlarge.

        Still, the two brothers planned to bring their dad north to Marikostinovo to show him the Bulgarian factory on Greek Orthodox Easter, which last year fell on May 1. The outing sounded lovely to me. But then Nikos wrote to stress that, really, the Easter trip was irrelevant. "My father has nothing to do with GAL," he said. "He can tell you nice stories about his life and how he started but nothing about GAL." In a subsequent note, Nikos added, "The only person who is every day in the company is me. I'm the captain of the ship now and I stay the wheel even in a storm."
        It was quite clear that I was dealing with a family business. But it wasn't until I received another message, on May 12, that I fully understood Nikos' dire nautical reference. "Hi Bill,” Nikos wrote. "I need your assistance. There are some companies in US who are executing military projects for African or Asian or Middle East countries. ... Of course if you will help us to find customers you will receive from us a commission as reward."
        When I called Nikos, he confessed that GAL had been without work for three months. He had not hired any Bulgarian workers as yet and his Greek workers were, for the moment, back in Greece. Konstantinos had not planted his garden, and Nikos was lamenting how he'd failed to prospect for new work last winter. "I had to start the company," he said. "I had to put the machines into the factory. Everything else was passing from my head." He added, though, that GAL was on the cusp of inking a deal with a Saudi Arabian company for 50 cranes, and he opined hopefully that Bulgaria was on the cusp of a glorious moment--the sort of moment his dad experienced as he helped rebuild Greece. "They are building a lot new roads here in Bulgaria. They are getting money from the EU; they are trying to update this country. We will get there. We'll succeed. We're not selling chips. We're selling cranes, and we need time."
        I corresponded with Nikos just one last time, in early January, and it was only then that he spelled out exactly how his life had become chaos since Greece's apocalypse brought him to Bulgaria. His brother had left the company, simply because he did not want to keep commuting to Bulgaria. Konstantinos, the welder, had snuck back into the plant one night, after his his being laid off, Nikos said. "He stole one of my welding machines. I know that was him because someone saw him and he told me so. I couldn't do anything because I do not have physical proofs and also he left to Crete, so The Bulgarian police were not able to arrest him."
        Meanwhile, Nikos discovered that his accountant, based in Greece, had been cheating him. "I found out that he didn't know one thing about the Bulgarian law," Nikos wrote. On the sly, he was subcontracting to a cut-rate Bulgarian accounting firm and pocketing about $80 profit each month. The man crunches numbers for over 200 Bulgarian-based Greek companies, Nikos said, "so you can calculate how much black money he makes every month!" Nikos fired the accountant.
        "The factory in Greece is now destroyed by burglars," Nikos continued. "When they saw that the factory was empty they stole all the electrical cables, all the aluminum windows, all the small metal parts, all the office equipment that was left behind, all the small machines that were there. Generally they destroyed the building. Finally they stole all things that we have from the ELVO job!" In another twist, the Austrian client got into a quarrel with Nikos after he alleged that it had stolen some mechanical drawings. The company took its business elsewhere.
        "For a long period, almost six months," Nikos said, "I was completely alone in the factory, trying to find new customers for the local market." He found them, but now, Nikos had but two employees. "This difficult period," he said, "helped us to see who is with us and who was against us. Now I can say that I have zero friends so I have to stand in my feet only. Thanks God I have passed all the most difficult times. Now the ship is out of the big storm and the captain is still on board! Thank you for your interest in my story."

Bill Donahue is a journalist living in New Hampshire. He has written for The New York Times Magazine, The Atlantic, Bloomberg Businessweek, and Harper’s. He is also the author of Runaway: How A Slave Defied America’s First President.
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