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Economy

COVID-19 Aftermath Brings Double Jeopardy for Greece’s Economy

ATHENS – The deadly COVID-19 Coronavirus has brought a double whammy for Greece: tourists are needed to bolster an economy in line to rapidly shrink just as it was recovering from a long crisis, but more visitors could mean a resurgence in the disease.

While Tourism Minister Haris Theoharis said he hopes tourists will return in July, with year-round hotels set to reopen on June 1 with new hygiene guidelines, hotel owners said they fear empty rooms and beaches with people afraid to travel yet.

That could undercut a sector that brings in as much as 20 percent of the country’s Gross Domestic Product (GDP) of 184.16 billion euros ($200.3 billion) and is the biggest revenue producer, now needed more than ever.

There’s another economic bugaboo being thrown in the mix: Capital Economics ratee the Greek economy as amongst the most vulnerable because of the pandemic because of a dependence on tourism and the high debt, which is rising by the second.

Greece relied on three international bailouts of 326 billion euros ($354.58 billion) that began in 2010 and ended on Aug. 20, 2018 and the New Democracy government, after unseating the anti-business Radical Left SYRIZA in July 7, 2019 snap elections, was accelerating a recovery until COVID-19 hit.

Greece’s economy will be monitored for years by the Troika of the European Union-European Central Bank-European Stability Mechanism (EU-ECB-ESM) and failure to hit fiscal targets – exacerbated by the virus’ effect on businesses closed during a lockdown – would trigger more spending cuts just as the government was trying to provide safety nets.

In a grave forecast, Capital Economics foresees a contraction in Greece of 15 percent for 2020 with only a 10 percent bounceback in 2021, setting the economy back into the nightmare years of bailouts and austerity measures.

The London-based economic research consultancy said countries most at risk from the COVID-19 fallout are those relying mainly on tourism and with high debt, both applicable to increasingly-battered Greece.

In a feature, CNBC said the Washington, D.C.-based International Monetary Fund (IMF) that took part in two first rescue packages of 240 billion euros ($261.04 billion) expects Greece’s economy will contract 10 percent – still a crushing number – and that unemployment will hit 22.3 percent, wreaking more havoc.

It’s been 10 years this month since Greece requested its first bailout, that for 110 billion euros ($119.64 billion) and the following decade was punishing, the slow recovery stopped in its tracks and reversed cruelly by COVID-19.

Investors were starting to show interest under the New Democracy government wooing them and there are some optimistic reports they will return to take advantage of bargains in a repressed economy providing opportunities for those with money. 

“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 via email.

Greece was one of the quickest countries in Europe to impose strict lockdown measures to prevent the spread of the virus. Two U.K.-based health experts told CNBC this approach has contributed to the relatively low number of cases, but brought tourism to a halt when hotels were among non-essential businesses shuttered on March 23.

“The tourism and travel industry contributes 21% to the Greek economy. Due to the pandemic, Greece currently stays closed to non-EU and EU tourism … threatening a sharp recession for the indebted Greek economy and massive job losses in the tourism and services’ sectors,” Kokkinogeni said.

The government is putting together a plan to give tourists confidence that staying in hotels and other accommodations would be safe in the immediate aftermath of a lifted lockdown but international air traffic would also be limited with fewer passengers on planes for some time.

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