Europe and the Coronavirus: Greek economy faces the biggest proportional risk

Europe and the world face a huge financial fallout from the Coronavirus. As much as Greece got hit the hardest of all European countries by the global recession, all indications are that may again be the case unless the Coronavirus makes a dramatic u-turn.

The Greek economy is still too vulnerable to have to face something as potentially crippling as the fast-spreading COVID-19. Greece’s economy has always used tourism and shipping as a crutch because it has very little industry. No one can predict how the spread of the virus will affect the economy as summer, the busiest time of the year for the economy approaches.

Greece has been included in the U.S. government directive as one of 26 European countries suspended from entry there, and as usual with any crisis, the U.S. has asked its citizens to avoid overseas travel.

Italy, Greece’s close neighbor, has the highest number of infected cases in Europe. As of March 13, the official figure was 12,4632 infections and over 1,000 deaths. So far it has imposed a total lockdown and its economy is expected to slide into a recession as billions need to be pumped into fighting the virus.

Like Italy, Greece has an aging population and they, together with people who have chronic health problems, are most at risk of not being able to survive the virus.

By March 12, there were 125,518 recorded infected people globally and of these 22,105 were in Europe, of these, 99 are in Greece. As it tries to contain the virus, the Greek Health Ministry announced the closure of all schools and universities a week ago. Other measures have also been announced in the hope to restrict movement and public gatherings.

Doctors are prepared and can advise anyone who suspects that they have the virus by phone on what measures to take, and citizens have been asked not to go to public hospitals.

On a lighter note, Greek authorities plan to turn the 155 tons of seized alcohol sitting in customs warehouses into sanitizer to combat the shortage of antiseptic sanitizers.

Across the globe, projections for economic growth in 2020 have been cut because of the resources that countries will need to fight the virus. The Greek economy could slow to 1.88%, much lower than the government’s projection of 2.8%.

Greece cannot afford to miss its growth target for 2020 because it could have a negative fiscal impact and the money needed for this unbudgeted spending on health will have to be found somehow.

Meanwhile, the Greek Tourism Confederation (SETE) has called for the government to implement measures to assist these businesses that rely heavily on tourism. Even though tourism increased over the crisis years, the high taxes and social contributions crippled many players in the industry.

Many of the businesses in the tourism industry have reached an agreement with banks, the revenue department and social security services to settle debts accrued over many years and SETE is calling for a suspension of these obligations until May 31.

The Hellenic Federation of Enterprises (SEV) points out that the announcement of the suspension of tax and social security payments may be a positive step but will not be enough to help businesses overcome a decrease in spending. SEV feels that the government must consider offering businesses tax rebates and a reduction in taxation if the majority of these are to survive.

With a bit of luck: this may be a small bump in the road for the Greek economy because it will need cash for the event it doesn’t meet its obligations to its lenders later in the year –   a promised 3.5% budget surplus. If not, it could lead to further restrictive fiscal measures, something that may be possible, but highly unlikely. The last thing property owners want in Greece is another crash during this time of partial recovery.

Everyone in Greece looks forward to the summer, and this year is no exception. There are hopes that the virus, which appears to prefer cooler weather, will recede and allow the economy to continue smoothly on its chartered course.