After weeks of strict quarantine, numbers are indicating that Greece has successfully managed to contain the spread of Covid-19. Only 151 coronavirus fatalities had been logged on Sunday – one of the lowest death rates in the entire European Union. But in the process of saving lives, the country has taken a massive economic hit. Now, the government is working to reopen and hopes to salvage the rest of 2020’s tourist season, with Prime Minister Kyriakos Mitsotakis suggesting that the sector could be back in business by July 1.
Tourism is one of the biggest drivers of the Greek economy and accounts for approximately 20 per cent of total GDP, and one in four jobs. Next to Cyprus, Greece is the second most exposed country in the industry. Now, the Mediterranean nation is beginning – over the next few weeks – to undergo staged re-openings of restaurants, schools, shops, churches, and archaeological sites.
Speaking during a televised address, Prime Minister Mitsotakis said, “This is not the epilogue of our adventure but the continuation. Our emergence from quarantine will be done step by step. No one can rule out the risk of the threat rekindling. A return (to normal life) must not lead to a relapse.”
But resounding damage from the virus has already been done. Greece fought long and hard to leave austerity behind, only exiting its third and final bailout last August after years of hardship. And with “budget season” fast approaching in September, the country must once again present the EU with its budget figures and planned fiscal reforms. The debt-to-GDP ratio currently stands at 181.2 per cent, with a debt of 323 billion euros. This wasn’t chump change when times were good, but in a time of post-coronavirus global recession it sets progress back significantly.
The government deficit is forecast to reach 6.4 per cent of GDP in 2020 and decrease to 2 per cent in 2021. Meanwhile, public debt is expected to increase to 196 per cent of GDP this year before declining to 183 per cent the next – a major step backwards after a valiant economic recovery from the sovereign debt crisis and austerity measures that lasted a decade. “The recession and the cost of fiscal measures to tackle the crisis is expected to lead to a sizeable deficit in 2020,” the EU Commission predicts.
No country has escaped the pandemic with their economy unaffected, but according to the European Commission’s Spring 2020 Economic Forecast, Greece has taken the worst hit in the entire eurozone. The report predicts that the country’s GDP will contract by 9.7 per cent this year – the highest out of all EU countries. The euro-area economy is expected to decrease by 7.7 per cent. The International Monetary Fund has forecast similarly for Greece and expects a 10 per cent contraction in GDP with an unemployment rate as high as 22.3 per cent. Official government forecasts, however, are less pessimistic predicting a contraction of 4.7% for 2020, followed by 5% growth in 2021. The Commission’s forecast does not consider government support measures estimated to the tune of 6.9% of GDP.
Exports are expected to severely decrease for the remainder of the year due to the global nature of the crisis and overall drop in demand for goods and services. “Despite the swift policy response, the strong contraction in output is forecast to take a toll on employment,” the European Commission report grimly notes. The Greek government has taken measures to protect the labour market and limit lay-offs, but it is expected that 160,000 jobs will still be lost. However, the report says the country should anticipate a relatively strong rebound next year. “The partial recovery in 2021 is expected to have positive effects on the labour market, bringing the unemployment rate down again, to about 16.5 per cent,” the document reads.
Meanwhile, private consumption in Greece is also expected to drop, as are consumer prices, by 0.6 per cent this year because of downward pressure from wages, energy prices, and industrial production, followed by a small increase in 2021 as the economy recovers. Thanks to growing uncertainty, investment is also expected to drop and Greece has delayed privatisation and asset sales to avoid low offers. However, the EU Commission has noted that the liquidity support provided by the Greek government and the EU ought to help companies get past the worst part of the contraction period and speed overall recovery.
“Economic activity in Greece, Italy, Spain, Croatia, and to a lesser extent France are forecast to contract the most,” said Paolo Gentiloni, European Commissioner for the Economy, during a press conference. Tourism is a major industry and contributes between 10 and 11 per cent of the total European GDP, employing more than 27 million people in mainly Southern European countries.
“The Covid situation comes to derail the long-awaited recovery of the Greek economy,” Athanasia Kokkinogeni, Europe senior analyst at the research firm DuckerFrontier told CNBC.
Open for Business
Greece is set on re-opening its tourism sector as quickly as possible, and the government is expected to announce a strategic plan for the sector this week, based on five pillars: hygiene protocols; economic support for tourism businesses; diplomatic agreements on border controls; a targeted promotional campaign; and leveraging existing relationships with tour operators. The country has called on the European Commission to implement EU-wide health protocols to enable the recovery of the sector, while exploring the possibility of establishing “safe travel zones” or bilateral agreements with countries that have similarly succeeded in maintaining low levels of COVID-19 infections and virus-induced casualties.
Greece, Cyprus, and Israel are considering one such safe corridor, while Prime Minister Mitsotakis has suggested a similar safe travel zone be established among the ‘first movers COVID-19’ group, an unofficial forum started by Austria, that includes Greece, Israel, Singapore, Denmark, Norway and the Czech Republic.
But getting tourist season jump-started after the coronavirus pandemic could prove to be easier said than done. Restrictions on travel will possibly remain in effect throughout the summer and demand is likely to be low, due to both consumer fear as well as the large hit many individuals have taken to their personal finances. The EU Commission noted in their report that, “Since more than 70 per cent of tourism receipts are concentrated in the main summer months, impediments during this period would have a large impact on overall exports of services in 2020.”
Typically, more than half of Greece’s tourism revenue and profits are generated between July and August, a slice of the market the government is keen to salvage. Last month, Tourism Minister Harry Theoharis told Reuters that “This season is not going to be like the other years, I would be a fool to believe that this could ever be the case. However, there is a lot that we can do to re-open the tourist economy, the flows.”
Forecasts are continuously being revised,” said Theoharis. “At this point, any adjustment being made is downward. That means that we are expecting tourism to take a 50 per cent hit this year. And that is the most favourable scenario being put forward in the studies we are conducting.”
Speaking to the BBC, the tourism minister said “We do want people to come to Greece. Of course we will take precautions in terms of the requirements before travelling but also in terms of the way that we travel, the way that we stay, on the beaches…social distancing rules will apply but we have welcomed tourists for more than 50 years, we want to continue showing the kind of hospitality that we are very much known for.” The Greek Tourism Board is considering health tests that visitors must pass before they can be allowed entry to holiday in the country.
“For big, resort-type hotels it may just make more sense to shut down entirely for the season,” says Manolis Marrkopoulos, head of the Rhodes’ hotel owners, a popular vacation destination before Covid-19 forced everything to a halt. “Operational costs are just too high to sustain for a crisis that has no clear end date.”
“Quarantines and travel just don’t mix,” says Lyssandros Tsilidies, the head of Greek tour operators. “Which British national, or German, or American, is going to travel half-way around the globe for a week’s vacation knowing he’ll be quarantined for at least 14 days?”
Speaking to CNN, Mitsotakis said that “Ideally we want more high-end tourists where we can actually respect social distancing,” noting that there would be COVID-19 testing at airports, as well as temperature checks at hotels and local businesses, to help restrict the spread of the virus. “We have reached a point where we’ve almost completely suppressed the epidemic, at least in the first stage and we’ll begin to relax. We feel we’ve dodged the first bullet very clearly. I think we did it the right way. Of course, we didn’t get everything completely correct, but if you look at the numbers, you can’t argue with what we have achieved.”
By late April, a special government-appointed task force started making plans with tour operators to try and offset some of the economic damage. One idea is to lure back travellers at a later date by using vouchers from cancellations made earlier in the season. Greece receives a large portion of its visitors from Europe, especially Germany and the United Kingdom, but while a portion of Germans are keeping their summer plans in place, many British nationals are cancelling.
In a novel market approach meant to boost the flagging industry, Cypriot and Greek tour operators are advocating the idea of treating the two nations as a single tourist market. The Hellenic Association of Travel & Tourist Agencies (HATTA) and the Association of Cyprus Travel Agents (ACTA) plan to submit a joint proposal to both governments, which includes sharing tourists when conditions allow – providing both nations have successfully beat back the spread of the virus. The Cyprus-Greece business association looks favourably upon the measure and is working closely with the Deputy Ministry of Tourism and the Greek National Tourism Organisation in Cyprus to implement these ideas, seeing it as a way both countries can limit the damage to their respective tourist sectors. A ferry between Greece and Cyprus is being revived after shutting down two decades ago to boost the initiative.
