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Economy

COVID-19 Sounds Warning Bells for Greece’s Economy

ATHENS – The cost of containing the COVID-19 Coronavirus with a tight lockdown will be high for Greece, the spillover effect of most businesses ordered closed expected to shrink an economy just starting to accelerate recovery from a long crisis.

Greece had been expecting growth of 2-3 percent this year after a near decade-long devastation made worse for most with harsh austerity measures attached to three international bailouts of 326 billion euros ($356.56 billion.)

The rescue packages ended on Aug. 20, 2018 and the New Democracy government was enticing foreign investors and planning to restart major projects stymied by the former ruling anti-business Radical Left SYRIZA.

All that was brought to a screeching halt by COVID-19 with predictions the economy will contract up to 10 percent and bring back the nightmare years that saw workers, pensioners and the poor the hardest hit.

The government is spending 17.5 billion euros ($19.14 billion) in relief measures for workers laid off and businesses closed but with fears tourism – the country's biggest revenue engine – could fall as much as 70 percent state coffers are emptying.

The government reported in its 2020-21 stability program submitted to the European Union and creditors the economy will contract 4.7-8.9 percent this year, less than the 10 percent foreseen by the Bank of Greece and other analysts.

“The coronavirus outbreak has imposed a burden on the Greek economy as on the rest of the world economy, reversing the initial favorable short-term forecast,” the Finance Ministry said, the news agency Reuters reported.

The Greek economy is exposed to "external shocks due to a considerable dependency on tourism and transportation receipts,” it said, noting that the government’s main goals now were to bridge the growth gap caused by the health crisis and attract investment, with signs some foreign businesses are keen to cash in.

A primary surplus – which doesn't include interest on the debt and bailouts, the cost of running cities and towns, state enterprises, social security and some military expenditures – is being drained and expected to come in 1.9 percent under estimates.

Finance Minister Christos Staikouras said in March that Greece wanted more financial flexibility to get around bailout requirements that would otherwise trigger automatic spending cuts if fiscal targets aren't met as required.

Based on stability programme forecasts, public debt is seen rising to 337-billion euros ($368.59 billion) or 188.8 percent of Gross Domestic Product at the end this year from 331-billion euros ($362.03 billion) or 176.6 percent in 2019.

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