A restriction on foreign payments is hurting Greek startups that use cloud services based abroad, and the results of Sunday’s referendum may make their situation worse
The repercussions of the Greek debt crisis are hitting the country’s IT sector. Foreign spending restrictions have left some startups unable to pay for public cloud, online storage and web hosting services they rely on according to a report by Fast Company.
Greece is a small country with a small data center market, which means local entrepreneurs often have no choice but to rent their infrastructure abroad. They might have the money, but current financial restrictions mean they are unable to make international transfers to pay for that infrastructure, until at least until July 7, when the Greek banks are supposed to be open again.
The situation could get worse following the referendum on Sunday, in which he overwhelming majority of Greek citizens refused the latest bailout package proposed by European creditors.
The future of the country as part of the European Union is now under question. Meanwhile, Greece’s finance minister Yanis Varoufakis has resigned on Monday morning. “I shall wear the creditors’ loathing with pride,” he wrote in a blog post.
Parthenon in Athens, Greece
Source: Thinkstock / Goodshot
No money, no cloud
A week ago, Greece’s radical left-wing Syriza government suspended international bank payments and limited cash withdrawals from ATMs to €60 per day, to prevent funds from leaving the country.
This emergency measure has affected ordinary businesses that are buying cloud services from data centers located abroad.
According to figures from DCDi, the Eastern Mediterranean data center market – including Greece, Malta, Cyprus, Israel, Lebanon and Jordan – is expected to consume 150MW of power in 2015.
That’s a small fraction of the power consumed by data centers in neighboring countries, and an indication that Greek businesses most likely host data abroad.
For comparison, data center power consumption in nearby Italy for the same period is predicted to hit 1,150MW – and Italy is by no means the largest European IT market. Greeks have suffered the effects of the 2008 global financial crisis much longer than their neighbors, further stifling the growth in data center space.
“If they’re doing business in Greece and generate revenues only in the country, it’s really tough to overcome these barriers,” Nick Drandakis, the CEO and founder of start-up Taxibeat, told Fast Company. “Other fellow entrepreneurs in the country are facing big hurdles in paying their costs.”
Some start-ups have been forced to negotiate with their suppliers, asking them to defer service charges. Others have delayed launching new services until the political situation is stable.
A few American technology businesses have volunteered to help: for example, cloud provider DIgitalOcean has made changes to its billing process so its Greek customers are not charged for the first week of July.
In the event of a Greek exit from the Eurozone, some people suggest that the country should adopt the online crypto-currency Bitcoin as its national currency.rather than falling back to the drachma, which it replaced with the Euro in 2001.
However, experts warn that if the stalemate between foreign lenders and the Greek government continues, the country might run not just out of money but also essentials like food and medicine.