Greek Business File, June-July-August 2020, No 126

By K. Botsiou

 

The effectiveness of the Greek lockdown was surprising; however, the exit from the lockdown proves definitely trickier than the quarantine, estimates Konstantina Botsiou, Associate Professor of Modern History and International Politics at the University of the Peloponnese

 

Greece has been widely praised for the low number of Covid-19 victims. With 162 deaths and 2,810 confirmed infections as of mid-May 2020, it ranked 58th worldwide and 21st in the European Union, well below the global average of 21 deaths per million.

The effectiveness of the Greek lockdown was surprising. The national economy had been devastated by the crisis of 2008. Greece lost 25% of its per capita GDP, received practically four bailout programs to survive in the Eurozone, and in 2019, her debt reached 176.6% of GDP. The pandemic struck in a severely weakened public healthcare sector with about 18,000 doctors having fled abroad in search of work and many hospitals facing collapse. When the pandemic broke out, public hospitals disposed of only 565 Intensive Care (ICU) beds in a country of 11 million, namely 5.2 beds per 100,000 people, compared e.g. to Germany’s 29.2. In the following two months, the number of ICU beds was almost doubled to 910.

To calm public fears, the government committed itself to the expansion of this capacity until the fall of 2020. However, efforts to hire medical staff with two–year contracts remained largely halfway and doctors complained about shortages of protective equipment. Greek armed forces were instrumental in filling the gaps by providing medical and nursing staff , health-care supplies and costly air transportation. Extra donations of medical supplies came from wealthy Greeks, especially shipowners and industrialists.

Unemployment rang the bell

The rise of unemployment rang the bell. 1.7 million private-sector employees (81% of the affected private-sector workforce) received an 800-euro benefit for April and May, whereas six scientific categories (with high representation in Parliament benches) were entitled to a 600-euro allowance (voucher), originally conditional upon training programs for teleworking. Universities, a previously popular target of small-state advocates, showed an exemplary handling of the lockdown; 96% of classes were offered online.

The right reaction

A key success factor was the timely reaction of Mitsotakis’s government. All educational entities were closed on March 13th . On March 23rd a nationwide lockdown was imposed. On the previous day, health authorities had reported 15 deaths and 624 confi rmed infections. Families separated swiftly the young from the old, an exercise quite demanding in a country of close family ties, where grandparents usually live next door providing an ersatz for the underdeveloped nursery school facilities. But early “warning signals” from Italy unveiled the heavy toll suffered by the elderly. Since Greece has the EU’s second-oldest population (after Italy), inter-generational solidarity flowed promptly from its traditional source of great respect for the elderly. After a brasdefer between the autocephalous Greek Orthodox Church and the Greek government, all places of worship held services behind closed doors only for clerics and Easter was celebrated at home.

The Greek “miracle” relied not only on governmental measures, but also on the people. According to the pandemic vocabulary, healthcare medical staff were recognized as “heroic”. The Health Ministry spokesman and healthcare expert Prof. Sotiris Tsiodras became the most popular person in the country. A great deal of recognition was given to the Greek people themselves for demonstrating unexpected self-discipline in social distancing and lockdown rules. From a cultural point of view, this confi rmed the greater importance attached to health than to the “market”. A lot of shops closed spontaneously even before the lockdown was announced. In a nutshell, the pandemic reinvigorated national and international confidence in Greece’s ability for governance after a long decade of public humiliations and dragging reforms. The crucial question is whether this record is sustainable.

Three basic issues

The exit from the lockdown proves definitely trickier than the quarantine. There are three basic issues: How to make the economy work amidst social distancing and travel bans when a high portion of revenue comes from tourism; second, how to cope with the mounting demands of various professionals for state subsidies and benefi ts against the background of an overwhelming debt; and third, what is the right balance between an economic restart and people’s protection, while getting prepared for the almost certain fall wave.

Public beaches opened on May 16th , almost two weeks after the first relaxation of confinement rules. Yet most hotels will remain closed until the lift of the EU travel ban in mid-June in a wait-andsee fashion. Hopes lie with the fact that tourism revenues and 80% of business profits are generated in July and August. Expectations for arrivals from other countries less hurt by the pandemic, like Germany or Balkan nations, stay in limbo as all governments encourage domestic tourism. Hotel reservations remain low reminding of the rocky referendum summer of 2015. After that, though, tourism saved the day. In 2018, the number of visitors reached a record 30 million, alleviating the unemployment of 1.2 million people. In 2019, tourism revenue exceeded 18 billion euro and was expected to rise this year by 10%. Since tourism makes directly 11.7% of GDP (2018) and 30.9% of indirect income, its damage will have a critical impact on revenue and employment. The situation will worsen if the pandemic is not uprooted until 2021.

In the best-case scenario, Greek tourism will take a 50% hit in 2020, if projections for a 70% fall prove pessimistic. The widespread awareness that “quarantines and travel don’t mix” is more alarming considering the lack of other large export sectors, with the exception of Greek Fruits and vegetables. Unlike Spain or Italy, heavy industry and manufacturing production have a small share in the Greek economy.

For 2020, the IMF forecasts an unemployment rate of 22.3% and a severe recession of 10%.

The nightmare of recession

Recession will surely reduce state income from taxation, whereas an increase in taxation could prove detrimental to the government’s popularity. The ruling government received a mandate last year to revive the middle class by cutting taxes and off ering better employment opportunities through the efficient organization of the public sector, foreign investments, and privatizations. In the fi rst six months in office, the latter gained priority in view of hesitant private capital and limited public finances to allow ambitious tax cuts. Transport, constructions, electricity, tourism came to the first line of privatization efforts. The pandemic put many ventures on ice. Furthermore, it changed the agenda. Instead of privatization and more laissez-faire capitalism, state protection has come to take center stage in public demands. The multiplication of professionals calling for state protection are expanding governmental obligations. Artists and workers in tourism belong to the obviously affected categories at the moment. But also relative big companies (e.g. air transport) warn of the possibility to request state assistance. The list may well grow in coming months.

Easier said than done

A return to “normality”, a catch phase of the government, is easier said than done. Despite governmental communication campaigns, most people hesitate to go back to business-as-usual, preferring work from home, limited private transport and minimum social contacts. The lax attitude of some citizens and public offi cials in crowded celebrations, contradictions between economic needs and healthcare, e.g. the latest official announcement that children are no longer deemed “asymptomatic viral bombs” as schools re-open, and, above all, the prioritization of health in the public mind, a typical survival strategy in small nations, render the comeback a long process full of twists.

The pandemic imposed a temporary moratorium on political antagonism. Even the heated refugee problem did not break the general consensus. Particularly, international agencies expressed great concern about the tragic lack of doctors (e.g. three for 18,000 people on Lesvos) in extremely overcrowded camps. Refugee flows stopped, while Greek-Turkish tensions also seemed to ebb temporarily as Turkey was engulfed in its own deep coronavirus crisis.

The political truce reached an end in the beginning of May. Greece faced again intensified Turkish pressures in the Aegean and the Eastern Mediterranean as well as mounting criticism on social and economic issues. The main opposition parties, Syriza and KINAL, feel fit to profit from the difficulties of the government to accommodate public grievances as pandemic is changing not only Greece, but the world. Despite the strong parliamentary majority of the government, they invest on their ideological emphasis on public spending for social programs and economic safety in order to re-attract people’s hearts and minds.

Integration: the million-dollar question

Against a horizon of low economic expectations in 2020, Greece will need strong financial support from the EU. Only naturally, it united its voice with other countries requesting the mutualization of coronavirus-incurred debt in the form of “corona-bonds” (eurobonds), like Italy, Spain, and France, among others. With talks about the EU’s rescue plan painfully open, Greek citizens continue to link their faith in the integration project with EU financial solidarity at the war on the coronavirus.

The Covid-19 pandemic is thus not only a medical or economic matter, but a highly political one. Greece and the EU will have to get prepared for answering the million-dollar question as to the overall purpose of integration. Some fundamental ideas lie in its history. This year’s Europe Day on May 9th went largely unnoticed in many countries, including Greece. Hopefully, things will be different next year.