July 23, 2021

Europe

GREECE: Infection surge dominates daily political agenda

BY Wolfango Piccoli

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( 5 mins)
  • The resurgence of the pandemic dominates the political agenda, reducing the prospects of a cabinet reshuffle and/or snap elections by year-end.
  • The reform of the supplementary pension system is likely to secure the required parliamentary approval by the end of August.
  • The continuing surge in Covid-19 infections and the increasing prevalence of the Delta variant is heightening concerns about the potential impact both on the tourist season and the return to schools and universities in autumn.

Prime Minister Kyriakos Mitsotakis has likely put any thoughts of a new cabinet reshuffle and even snap elections on the backburner for the time being as the resurgence of Covid-19 in Greece poses new challenges, especially with regard to another meager tourism season and the economic consequences that will follow.

Instead, the government is focusing on pushing through parliament in the coming weeks a number of flagship reforms, including the overhaul of the supplementary pension system.

Mitsotakis had been hoping to leave the pandemic behind this summer as his center-right government reached the midway point of its four-year term in office. He was aiming to oversee an improvement in tourism receipts, the launch of Greece’s recovery plan and a return to growth. However, Covid-19 numbers have risen significantly in recent weeks and the vital tourism sector is already pushing for more state support in the autumn amid fears of more disappointing visitor numbers this year.

The recent developments seem to have ended any possibility of the PM opting for an early election this autumn to capitalize on his New Democracy (ND) party’s double-digit lead over left-wing SYRIZA in the polls, thereby also quashing any threat from the proportional representation system that would apply for the next national vote, before returning to an enhanced PR method for the next elections.

There was also strong speculation that Mitsotakis would shake up his cabinet this summer by way of signaling a fresh start after the pandemic, but also to galvanize his administration ahead of possible snap polls.These options seem to be off the table, at least for the rest of this year, as the government focuses on its reform program and tackling the fallout from the pandemic surge.

Greece reported more than 3,500 daily coronavirus cases on 20 July in what were the highest such numbers for several weeks. Also, the Delta variant is gradually becoming more dominant and experts believe the number of daily infections will continue to rise throughout the summer.

The situation is not helped by the fact that the number of daily vaccinations has slowed this month to below 100,000 despite the government offering Greeks aged 18-25 a 150-euro incentive to get vaccinated. So far roughly 120,000 out of an estimated 980,000 Greeks in this age group have been vaccinated. Vaccination levels in the general population have reached almost 52% for at least one dose of the vaccine and nearly 44% for complete vaccination. The recent slower uptake has raised doubts about whether the government can achieve its target of vaccinating 70-75% of the adult population by the end of the summer.

These developments have fueled concern about the tourism sector and the impact that another poor season will have on an array of Greek businesses, as well as public coffers. Last weekend, the authorities imposed a night-time curfew on Mykonos due to the high Covid-19 rate on the popular island. Similar measures in other resorts could follow.

Germany – one of the main sources of tourists for Greece – also placed the country on its high-risk list last week, meaning returning travelers will face restrictions. The UK, another big market for the Greek tourism industry, continues to have the country on its “amber” list. There are fears that this will scupper any chances of visitor numbers nearing 50% of the 2019 performance, as the government had hoped.

Associations representing tourism businesses have already suggested that they will need further state relief this year to survive. This could lead to the finance ministry having to redraft its fiscal plans as the government has started to phase out the economic support it provided in previous months to cushion the impact of the pandemic.

All this has undermined ND’s efforts to focus attention on brighter days ahead, including the release this year of up to EUR 4bn from the EU’s Recovery and Resilience Facility after Greece’s plan received the green light from Brussels.

The government has tried to move things forward, though, by unveiling reform legislation over the last few weeks. The most significant bill would see Greece’s supplementary pension system undergo a sweeping makeover. The draft law, which foresees a move to a capitalized rather than redistributive approach, is likely to be tabled in Parliament this week after the government and the institutions monitoring Greece’s post-bailout performance settled concerns about the short-term transition cost of the switch to the new scheme.

The government hopes to pass the bill by the end of August. It would mean that from 2022 all new entrants in the jobs market will join the capitalized system and from 2023 those under 35 will have the option to move across to the same scheme.

The government appears to have reached an agreement with Greece’s lenders about a new debt settlement scheme that would allow more than 800,000 businesses, sole proprietors and individuals to pay off a total of EUR 2.2bn of unpaid bills that accumulated during the pandemic in 36 or 72 installments.

Athens is also reportedly in talks with the institutions over making permanent some of the fiscal relief measures it adopted during the pandemic. This could involve the suspension of the solidarity levy for private sector incomes for 2021 and 2022 being extended to all incomes, including public sector employees. Also, a reduction in social insurance contributions could be kept in place and even increased.

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