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July 15, 2020

GREECE: A tough summer season

BY Wolfango Piccoli

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( 6 mins)
  • Data emerging from the tourism sector suggests that this industry is likely to see little action this summer despite the good management of the Covid-19 crisis.
  • While the noise about early elections in the Autumn is recurrent, this scenario remains unlikely.
  • A cabinet reshuffle is on the cards, but none of the key ministers is likely to be replaced.

The Greek government’s expectations of cashing in on the competent handling of the pandemic are unlikely to materialize this summer. Over the first six months of the year, the number of international passengers arriving declined by 67% to 2.6 million passengers from 7.8 million in H1 2019. The 1 July reopening of regional airports to international flights has not made much of a difference. The figures for the first two weeks of July suggest that arrivals are about 70% lower than in 2019. Greece is currently expected to rise no more than EUR 5bn from this year’s tourist season, down from EUR 18bn in 2019.

In the meantime, the gradual opening of the borders since June has led to an increase in the number of confirmed Covid-19 cases, although this has not yet led to any significant rise in the number of deaths. During the first ten days of July, 196 out of a total 326 coronavirus cases recorded were detected among visitors from abroad.

Opinion polls

Partly on the back of its prompt reaction to the first Covid-19 wave, New Democracy continues to enjoy strong support in the opinion polls, although its lead over SYRIZA has narrowed slightly over the last few weeks. According to a poll by Pulse for Skai TV, support for the center-right party is at 41%. This is 1.5 points lower than in June, while SYRIZA remains at 23%. The same poll suggested that most Greeks are pleased with the government’s performance in the one year it has been in power.

ND’s strong lead in the opinion polls continues to fuel media speculation about the possibility of Prime Minister Kyriakos Mitsotakis trying to capitalize on this advantage by calling snap elections later this year, even though the PM has rejected this idea. The uncertainty over the pandemic, and the risk that could be involved in holding a ballot in the fall, means that it seems unlikely Mitsotakis will consider this option.

Instead, he is expected to make some tweaks to his cabinet in the coming weeks. The changes are not expected to affect key positions, however, although the Economy and Investment Ministry could be split into two.


Earlier this month, demolition work started at the site of the former Athens airport in a seafront area known as Hellinikon. The proposed EUR 8bn regeneration of the vast site into a complex housing luxury apartments, offices, a yachting marina, and a casino resort was one of the flagship investment projects that Mitsotakis identified during last year’s election campaign.

EU recovery fund

The government is also focused on making the most of any financing available (worth up to EUR 32bn in grants) from the EU Recovery and Resilience Fund. Athens is conscious of the fact that it will have to present convincing investment plans to European officials later this year to secure funding. In a bid to add credibility to this effort, the PM tasked a committee of experts, headed by Nobel laureate Christopher Pissarides, to come up with a set of proposals about key reforms that Greece should undertake.

A first draft put together by this committee was presented to the PM on 14 July. Some of these suggestions are expected to form the basis for projects that Greece will ask to be financed by the recovery fund.

The document reportedly sets out tax and labor market reforms, policies to boost innovation and reduce import-dependence, a shake-up of the justice system and education, and the introduction of a capitalized third pillar in the pension system. It is also said to have a heavy focus on digitalization and the green transition.

Fiscal and pension conundrum

On 3 July, the authorities announced a new package worth EUR 3.5bn to support businesses and employees affected by the pandemic. The main intervention will see firms paying less in tax pre-payments this year. Another round of measures worth an estimated EUR 2bn that will be mostly focused on the tourism sector is also expected.

So far, the government has pledged close to EUR 20bn in stimulus measures and loan guarantees to cushion the impact of the pandemic. Around 80K companies have applied for state-guaranteed loans worth EUR 20bn even though just EUR 7bn is available, highlighting the thirst for liquidity in the real economy.

The government wants to frontload as many of the fiscal interventions as it can this year because no fiscal restrictions are being imposed. Athens is not confident that the same will apply next year when Greece could be forced into some belt-tightening as part of its post-bailout monitoring. The total deficit this year is expected to be close to 8% of GDP.

A 14 July ruling by the Council of State on backpay for pensioners handed the government a challenging issue to manage in political and fiscal terms. The court ruled that that money should be paid to pensioners for cuts they suffered up to 2012 and for the 11 months between the court’s prior ruling in June 2015 and the so-called Katrougalos pension reform in May 2016. The bill to compensate the 200-250K pension who appealed is estimated at around EUR 400 million. If the backpay is extended to pensioners who have not appealed, the bill could reach almost EUR 4bn. This will be a delicate political decision for the government as ND traditionally dominates among the older age groups.


In its recent interim forecasts, the European Commission revised down from 9.7% percent to 9% the Greek recession for this year. But it also trimmed the recovery expectations substantially for 2021, when the economy is expected to grow by 6% rather than the 7.9% thought previously.

If those estimates materialize, Greece’s GDP by the end of 2021 will be 3.5% lower than the end of 2019, implying that it may not reach pre-crisis levels until the end of 2022.


Despite the pandemic setback, Alpha Bank is proceeding with its Galaxy portfolio securitization, which will leverage the Hercules APS. The transaction includes the sale of Cepal, the loan management entity. The first round of non-binding offers has been completed. The process is expected to be completed by the end of 2020. Alpha Bank also completed the sale of its EUR 1.1bn Neptune portfolio at 24% of the total on-balance sheet gross book value.

As a new wave on NPEs is anticipated, the Bank of Greece is looking to use additional tools that will complement the existing APS to help banks improve their balance sheets. One such possible solution is an asset management company that will also undertake the sale of NPEs and address the large portion of deferred tax credits.

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