After recession, Greece begins a slow ascent
Greece’s economy has steadily improved as a result of increased tourism, but critics say that isn’t enough.
Athens, Greece – In the heart of Athens, Monastiraki Square shows signs of life. Two years ago, at the height of the financial crisis, this square became overrun with stray dogs, panhandlers, and boarded shop windows. Now, on a bustling summer day, it’s filled with tourists, locals and new businesses. Cafes brim with diners, pedestrians stroll down Ermou with $7 lattes in ubiquitous white cups, and parades of cruise ship passengers with cameras at the ready follow guides speaking in French, German, Japanese, and English up the steps of the Acropolis.
Lured by stunning beaches, centuries of architecture and culture, and budget-friendly options, an estimated 19 million tourists plan to visit Greece’s mainland and island in 2014, and could spend over $17bn. Their return is a welcomed sight in Greece’s capital city, where political unrest and rioting previously kept visitors away.
But John Zindar, a partner at the European-American Business Organisation and professor at New York University’s Center for Global Affairs, says the millions of tourists aren’t enough to boost the Greek economy. “The problem with tourism is that so much of the money won’t stay in Greece,” Zindar said. “What Greece really needs to do is be able to sustain some competitive industry. The country may have some industries that used to be competitive, but none of them are anymore, because nothing has been invested in any of these companies in years now.”
“Things are a little better than they were two years ago,” said one government official who spoke on condition of anonymity because he wasn’t authorised to speak to the press. “Some sectors are recovering, slowly. Tourism and tourism-related businesses are increasing. But it’s happening too slowly. We are still suffering.”
He said that so many major manufacturers had left Greece that one of the few remaining, Coca-Cola, ran an ad reminding people that they remained in the country. “What does that say, when they have to tell people they’re still here? ‘Drink Coke, because we haven’t abandoned you?'” Coca-Cola left the Athens stock exchange for London’s earlier this year.
‘In some ways, it’s worse’
Greece is going to continue to need money from international lenders for quite some time.
After six years of a deep recession and austerity measures designed to help the country claw its way back into the black, Greece’s public debt level is currently at 177 percent of GDP. Nearly 1.3 million Greeks remain unemployed, many of them long-term.
“The economy is mostly the same as it was two years ago, but in some ways, it’s worse,” said one unemployed man who asked his name be withheld to protect his prospects. “Some of us (who lost jobs during the recession) are just now running out of money, so we feel it more now.”
Even the employed have felt the pinch. Changes to the income tax code written into law in December, and set to go into effect in January 2015, will not only impact how personal income tax is calculated, but lowers the cap on exempt income, and asks taxpayers to prepay their tax payment and withholding against the following year’s income.
Vasileios Gkolfinopoulos, a chiropractor and treasurer of the European Chiropractic Union, said Greek citizens have already noticed the difference in their paychecks, and in their tax payments. “Immediately after the crisis, people said, let’s do the right thing, let’s pay our taxes and get our country out of debt,” Gkolfinopoulo said. “But with the new tax structure? I guarantee you, next year you’ll see a lot of people who are suddenly reporting zero income.”
Despite the continued recession, there are signs that the worst has passed. While still higher than the rest of the Eurozone’s average unemployment rate of 11.6 percent, the Greek unemployment rate has improved at a painstaking rate. At its peak of 28 percent in 2013, the rate is now 27.2 percent, according to the Greece statistics bureau Elstat. The European Commission has estimated that rate will continue to drop to 24 percent in 2015. Youth unemployment, however, remains above 53 percent. In a recent report, the IMF noted Greece’s significant progress in righting its economy, including increased investor sentiment, the issuance of a medium-term bond, and efforts to reform its tax codes. In anticipation of a third international bailout, Greece’s parliament last week passed a law to prevent tax evaders from continuing to do business in the country.
“Greece is going to continue to need money from international lenders for quite some time,” said Zindar. “What that looks like might change over time, but they’ll need lots of cheap money to help pay their debts before they default, and help in restructuring their loans. The timing is critical. To get the next bailout, Greece is really going to have to show that it’s continuing to reform.”
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In September, Greek officials will meet with the country’s troika of international lenders – the European Central Bank, European Commission, and International Monetary Fund – in Paris, rather than Athens, where such meetings previously have convened, and have garnered significant attention from press and protestors alike. The change in venue is an important step as it signifies both a metaphorical and literal distancing of the troika from Greece. During the meeting, officials will discuss disbanding the troika in favor of allowing Greece to chart its own economic recovery into the future.
“I think people understand that some things need to change,” said Dr. Christodoulos Stefanadis, Chair of the Greek Council of Economic Advisers and the Euro Working Group representative of Greece, as well as an associate professor in the Department of Banking and Financial Management at the University of Piraeus. “It’s one of the deepest recessions that a developed country has faced in the last decade and the Greek people have handled it well under the circumstances. They’ve shown a lot of spirit.”
“In five years, Greece will be a much more extroverted economy,” Stefanadis said. “We will have a much stronger export sector, we will be more competitive internationally. Because that’s the only way to go, and people already understand that this is the future.”
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