GREECE: Lockdown relaxed amid growing concerns about toll on the economy

A gradual relaxation of lockdown restrictions is underway as Athens is considering further support for businesses. Despite increasing dissatisfaction with the government's handling of the pandemic, the ruling ND is still far ahead of its main rival in opinion polls. The official growth target of 4.8% looks increasingly unrealistic. On this front, much will depend on the performance of the tourism sector. Greece started relaxing its latest lockdown on 18 January, when the government allowed retail stores to open under certain conditions. This could be followed by ski resorts and the foodservice sector in the coming days and weeks. The move came amid growing complaints from businesses and concern about the pressure on public finances as the finance ministry scrambles to extend existing stimulus measures or find new ones. Greece's Covid-19 numbers have dropped considerably this month – less than 50 deaths per day and fewer than 350 intubated patients - allowing the government to relax restrictions. The coronavirus vaccine program was also launched on 28 December, although rollout has been slow. As of 20 January, Greece had vaccinated around 90,000 people, which is less than 1% of the population. The daily number of vaccines has averaged around 5,500. Opposition parties have criticized the government for the slow pace of vaccinations. Prime Minister Kyriakos Mitsotakis has argued that limited supplies of the jab have dictated this. The country is due to receive 1.3 million doses of the Pfizer vaccine and another 235,000 doses of the Moderna vaccine by the end of March. Government officials have promised a gradual ramping up of the program, which they say will take daily vaccinations from 8,000 to 17,500 by the end of January, with an eventual target of two million a month once enough doses become available. The government has pledged to create four large vaccination centers in Athens and Thessaloniki by next month. Ratings and reshuffle Despite the criticism over the vaccination program, the ruling New Democracy (ND) maintains a large lead in this month's opinion polls. Although support for the center-right party has ebbed over the last few months, it remains far ahead of its main rival, left-wing SYRIZA, still struggling to attract support. A poll conducted by Marc for Alpha TV gave ND a strong lead against SYRIZA, with the center-right party on 38.6% against 20% for the leftists. However, 55.8% of respondents approve of the government's performance overall, down from 76.8% in April. The prime minister's decision to conduct a cabinet reshuffle at the beginning of 2021 has fueled speculation that he intends to call snap elections later this year in a bid to capitalize on ND's strong and consistent poll lead. It would also help him secure a new majority before any potentially damaging fallout from the economic difficulties created by Covid-19. The next elections would be held under a proportional representation system, meaning the winning party would not be awarded any bonus seats in Parliament. Even with its current strong standing, this could prevent ND from gaining an outright majority. However, SYRIZA's poor performance and the lack of possible coalition partners would probably lead to a second vote, held under a different electoral system, whereby the winning party gains 40 extra-parliamentary seats. One of the reasons that Mitsotakis might opt for elections before his party's four-year term expires in the summer of 2023 is to overcome the proportional representation hurdle before there is a risk of the opposition parties being able to put together enough seats to form a coalition. Prime Minister Mitsotakis has denied that he has any plans to call a snap vote this year. Nevertheless, this has not killed off speculation and, for the reasons mentioned above, the option of early elections cannot be ruled out. Economy The finance ministry had allocated EUR 7.5bn of fiscal support to mitigate the impact of Covid-19 in 2021, after allocating EUR 24bn for this purpose last year. The latest lockdown has sparked concerns about whether these funds will suffice. It is estimated that up to EUR 6.5bn of the annual allocation for 2021 might have to be used to support businesses during the first couple of months of the year. Even the retail sector, which re-opened on 18 January, will still be eligible for support measures. One of the main methods for providing financial support to businesses has been the low-cost state loans, which is done through refunding tax prepayments. The government has just completed the fifth round of this process, receiving 710,000 applications for a total of EUR 1.5bn. Half of this will be paid out in the form of grants. The 2021 national budget foresees growth of 4.8%, but this was based on the expectation that the lockdown would be lifted before Christmas. Revised projections are now starting to reflect this change in expectations. This week's forecast published by the state-linked Centre of Planning and Economic Research (KEPE) sees the economy contracting by 10.4% year-on-year in Q1, before moving to growth of 3% in Q2. If the aggregate decline in the first half of the year is 3.7%, as KEPE forecasts, the Greek economy will need to grow by 13.3% in H2 to reach the official target. Hitting this target will partly depend on the tourism sector's performance, a key driver for the Greek economy. In 2020, travel receipts fell to EUR 4.25bn from almost EUR 18bn in 2019 as the number of visitors to Greece plummeted by more than 75%. The authorities are hoping that in 2021, the revenues from tourism will double compared to last year, although this would still be around half as much as in 2019. Another important factor in the recovery process during 2021 will be the money Greece receives from the Next Generation EU package. Athens has reportedly received positive feedback regarding the proposals it sent for projects to be funded by the Recovery and Resilience Fund, dominated by the green transition and digital transformation of the country's notoriously bureaucratic public administration. The government envisages receiving EUR 2.6bn in grants this year, along with EUR 1.2bn low-interest loans and EUR 1.6bn from the REACT-EU cohesion package.

January 20, 2021

Europe

GREECE: Lockdown relaxed amid growing concerns about toll on the economy

BY Wolfango Piccoli

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January 20, 2021

Europe

GREECE: Lockdown relaxed amid growing concerns about toll on the economy

BY Wolfango Piccoli

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