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Greece Dealt With COVID-19: Can it Handle Recession?

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(EUROKINISSI/ΚΟΝΤΑΡΙΝΗΣ ΓΙΩΡΓΟΣ)

ATHENS – Nearly toppled by an economic crisis brought on by years of wild spending and runaway patronage, once-ridiculed Greece surprised the world by its swift response to the COVID-19 Coronavirus but now faces its aftermath: a deep recession.

The New Democracy government elected in July 7, 2019 snap polls – replacing the anti-business Radical Left SYRIZA that stymied major projects and didn't want foreign investors – was accelerating a recovery when the pandemic hit.

The administration responded with a lockdown aimed at preventing the spread of the virus but that meant essentially shutting down the country and all non-essential business, including hotels that are empty as the summer tourism season looms.

But the bolstering of businesses and workers with an array of aid from rent reductions to handouts and tax cuts is depleting a primary surplus and with businesses set to take big revenue losses that means a big hit on the state coffers too as the year grinds on.

That will cut deep into the ability of the state to prop up an economy slowly rebounding from the near decade-long crisis that required three international bailouts of 326 billion euros ($361.68 billion), making the recession worse.

An economy that shrank 25 percent and was set to grow as much as 3 percent this year instead will face a recession of at least 10 percent a range of analysts, including the Bank of Greece, have forecast.

In a feature, Agence France-Presse said that 10 years after the crisis began that, “Greeceonce again faces the specter of a grave recession in the midst of a global coronavirus lockdown,” bringing back the nightmare years, with unemployment likely to surpass 22 percent and thousands of businesses lost just as they were coming back.

It's a pain and unthinkable scenario with the damage not yet fully felt as the lockdown begins to ease back and Greece hopeful tourists will come although international air traffic hasn't resumed and worry whether people will want to travel as much anymore.

"The consequences of this coronavirus attack will undoubtedly be dramatic," Prime Minister Kyriakos Mitsotakis told Parliament.

"We know with certainty that (the recession) will be deep... we don't know how long the health crisis will last, we don't yet know if we'll have tourism,” he said, although Tourism Minister Haris Theoharis said he hopes people will come in July.

Tourism, which brings in as much as 20 percent of the country's Gross Domestic Product (GDP) of 180.54 billion euros ($200.3 billion) could see a loss of 52-70 percent but no one has any idea yet what will happen except breaking a record run of years.

But the expectations are that the loss from tourism along could be as much as 10 billion euros ($11.09 billion,) further depleting cash reserves that could be used for social services and to offset the losses brought by COVID-19.

Greece has already adopted measures worth 17.5 billion euros ($19.42 billion,) twice the estimated tourism losses for the year and totaling some 10 percent of national input detoured to help businesses and workers.

Including European Union funds that will reach 24 billion euros ($26.63 billion,) critical to keep from emptying a cash buffer after the Aug. 20, 2018 end of the three international rescue packages.

SYRIZA and its leader, the deposed former premier Alexis Tsipras, had been mostly silent as New Democracy won acclaim for its COVID-19 response that held down the number of cases and deaths but is sniping again and asking where the money will be.

"Where is this money? It's good for announcements but actual businesses and (employees) have not received a single euro," Tsipras claimed without any evidence and predicting that layoffs will soon be "out of control,” the AFP report said.

Panagiotis Petrakis, Professor of Finance at the University of Athens, told the news agency the recession won't be as bad as feared. “The most likely scenario is a six percent contraction, provided there is no deterioration in the pandemic," he said.

He added he believes that the economic impact of this crisis will be less protracted and the Washington, D.C.-based International Monetary Fund (IMF) that took part in the first two bailouts totaling 240 billion euros ($266.27 billion) expects 5.5 percent growth in 2021 – all bets are off though if COVID-19 comes back.

The Greek Finance Ministry said the downturn could be 4.7 percent followed by a 5.1 percent recovery but there's no equation for a combined world health and econmic crisis occurring simultaneously.

Even as businesses reopen they expect a sharp drop because of social distancing requirements to keep tables and people apart and with only outdoor tables available for some time.

"Last summer I had 10 tables outside and 10 inside. Now, I will just have three tables outside and I'm supposed to make do," Costas Gogos, owner of a tavern in the port of Rafina near Athens told AFP.

"Many will not even reopen, they won't manage with so few tables," added a pessimistic neighboring restaurant owner.