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Economy

COVID-19 Second Wave Battering Greece’s Faltering Economy Again

ATHENS – Three weeks after the International Monetary Fund (IMF) said Greece's economy – falling an estimated 9.5 percent during the COVID-19 pandemic – was due to rise by 4.1 percent in 2021, a resurgence of the virus and local lockdowns is making the finance ministry assess its expectations.

The country's primary deficit could exceed 7 percent of the Gross Domestic Product (GDP) of 174.64 billion euros ($200.3 billion) said Kathimerini, with falling tax revenues costing 44 billion euros ($51.35 billion) in losses.

Greece had been growing out of a near-decade-long economic and austerity crisis, with the help of 326 billion euros ($380.43 billion) in three international bailouts that ended on Aug. 20, 2018.

Despite that aid, debt is expected to soar to as much as 205 percent of GDP, a level that New Democracy leader and now Prime Minister Kyriakos Mitsotakis said while he was out of power was unsustainable when it was about 175 percent.

The contraction is expected to be even higher too, some 8.2 percent and with the prospect of more lockdowns around the country aimed at preventing the spread of the virus the Christmas and New Year holiday period could be a revenue washout if people can't go out to shop.

Trying to keep afloat an economy battered by the COVID-19 pandemic, Greece's New Democracy government earlier said it would inject another 11 billion euros ($12.84 billion) in a stimulus package through July, 2021.

The government during a first lockdown that started March 23 and lasted up to 10 weeks for most non-essential businesses had provided 17.5 billion euros 

($20.42 billion) in subsidies for workers temporarily laid off and their companies.

Greece got some 32 billion euros ($37.34 billion) in loans and grants from the European Commission to deal with the fiscal damages from COVID-19 but little has been given to some sectors, such as the arts, with many performers and musicians left without any income or programs to help them. 

The new aid comes on top of nearly eight billion euros ($9.34 billion) put into the economy, especially for small-and-medium sized enterprises (SME's) by the end of the year, including the EU funding, said the business newspaper Naftemporiki.

It wasn't reported what the stimulus package would be spent on or if more monies would go to workers or how the funds will be directed as the government tries to avoid a second lockdown that could be devastating.

Only a few days before the finance ministry said it would recalculate the economic effect, Professor Panagiotis Liargovas, President of the Centre of Planning and Economic Research (CPER) said there were positive indicators but said there was reason for caution too.

"In a battle between humans and the pandemic there is a certainty: humans will prevail. When this happens, the pandemic will look like a dramatic parenthesis in society and economy. At that point, we must continue our work and deal with three basic shortcomings, challenges for the country: productive, demographic and institutional," Liargovas said.

He underlined that the productive shortfall is attributed to the stalemate in which the country has fallen due to its commitment to high primary surpluses. "Gradually, Greeks will become poorer and the country will be downgraded on an income basis," he noted.

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