ATHENS – Greece will seek to renegotiate economic targets set by its European creditors because of the COVID-19 Coronavirus lockdown that closed some businesses as long as 10 weeks, the aftermath expected to be devastating to some.
The virus hit as the New Democracy government was reaching out to foreign investors to accelerate recovery from a near decade-long economic and austerity crisis, three international bailouts of 326 billion euros ($364.56 billion) ending Aug. 20, 2018.
That did nothing to slow the rising debt is now at 176.6 percent of Gross Domestic Product (GDP) – a rate which the ruling New Democracy while out of power said was unsustainable – and now is set to grow to 196.4 percent.
Greece's former ruling Radical Left SYRIZA in 2018 agreed to a primary surplus target of 3.5 percent of GDP until 2022, not including interest on the debt, the cost of running cities and towns, state enterprises, social security and some military expenditures.
Though this required level of surplus limits the government’s ability to spend, it came in exchange for softer debt repayment conditions but Finance Minister Christos Staikouras told CNBC he wants some changes.
“Taking into account what the Eurogroup (Eurozone finance ministers) decided recently, we don’t have these targets in 2020 and we will discuss as Europe, at the Eurogroup, the targets, the rules and the requirements for 2021 onwards taking into account the response to the coronavirus crisis,” he said.
He will negotiate with the Troika of the European Union-European Central Bank-European Stability Mechanism (EU-ECB-ESM) which has envoys monitoring the economy, with automatic spending cuts triggered if the targets aren't met.
The EU agreed in March to lift fiscal targets for each member country, giving them more wiggle room to deal with the unprecedented economic shock but only as a temporary measure.
The European Commission, the executive arm of the EU, forecast in May a debt-to-GDP ratio of 196.4% for Greece in 2020 and of 182.6% in 2021.
“According to the European Commission, we will not have the largest increase in debt-to-GDP in 2020, we will be the fourth-largest increase, but we will have the largest decrease of this ratio in 2021,” Staikouras told CNBC, saying that Greek debt is sustainable after his party said it wasn't while out of office.
A catalyst is whether tourists will come back when the doors open on July 1 in force after staggered hotel openings have begun and the international airport resuming to traffic on June 15, with island ferries now operating.
Tourism makes up as much as 20 percent of Greece's Gross Domestic Product (GDP) of 179.87 billion euros ($200.3 billion) and accounts for hundreds of thousands of jobs that could be in jeopardy.
“The percentage of this year, of 2020, economic decline depends to a great extent on the performance of tourism,” Staikouras said, and the government now said visitors from all countries will be welcome after setting an initial list of 29 with records similar to Greece in holding down the number of cases and fatalities, but with visitors who test positive for the virus required to go into quarantines of 7-14 days as needed.