Surge in tourism a gift for Greeks but prosperity is a long way off yet
After nearly a decade of grinding austerity, savage spending cuts and misery for millions, 2018 might just be the year when Greece finally turns the corner. Long-suffering Greeks have been given a beacon of hope with predictions by international creditors and the Bank of Greece that the economy will grow by 2.5 per cent next year – up from 1.5 per cent this year.
After years of austerity imposed by the dreaded troika, the country is expected to wean itself off international loans in August, ending its third and final bail-out. Things appear to be looking up.
The last two summers have been bumper years for tourism, with 27million visitors flocking to the sun-drenched islands of the Aegean and Ionian seas in 2016 and around 30million in 2017 – nearly three times the country’s population. The number of Britons visiting has surged by around 40 per cent, with three million expected to arrive next summer.
For some destinations, tourism has become too successful – the volcanic island of Santorini complains that it has reached saturation point.
The boom is, in part, a consequence of tourists steering away from formerly popular destinations such as Tunisia, Egypt and Turkey, which have been shaken by acts of terrorism and political unrest.
Those countries’ loss is Greece’s gain and 2018 promises to be another year in which tavernas, hotels and beach clubs from Corfu to Crete will be packed to capacity.
Exports are up in other sectors and companies are looking to expand again and take on staff. So are Greeks cracking open the ouzo and retsina in celebration this New Year’s Eve? Are the darkest days of poverty-stricken pensioners rifling through rubbish bins in search of something to eat a thing of the past?
Well, not exactly.
Analysts point out that even if the 2.5 per cent growth projection is proved correct, it comes from a very low base indeed.
Since 2009, when the economic crisis really began to bite, Greece’s GDP contracted by nearly 30 per cent. “After such a strong contraction of the economy, it was inevitable that there would be a bounce back. When you reach rock bottom, the only way is up,” said Wolfango Piccoli, an expert on Greece from Teneo Intelligence, a risk consultancy.
While tourism is undoubtedly strong and getting even stronger, the sector is a bubble, unrepresentative of the rest of the economy. Away from the whitewashed villas and quaint tavernas of the islands, Greece’s economy is still in trouble.
Unemployment remains at 22 per cent, the highest in the EU. For people under the age of 25, the jobless rate is a staggering 50 per cent.
Rates are falling, it is true, but many of the jobs being created are part-time and poorly-paid, with an average monthly salary of just €400 (£355). Taxes, hiked again and again, are cripplingly high. On the island of Rhodes, in the World Heritage-listed Rhodes Town, narrow alleys wind between honey-coloured stone palaces built by the Knights of St John.
The Marco Polo Mansion is a popular boutique hotel with an internal courtyard shaded by banana palms, but owner Spyros Dede knows all about taxes.
“I’m taxed on my income at a rate of about 70 per cent, if you take into account all the social security charges,” he said. “Taxes are so high that you’re left with no money for reinvestment. Things are getting a little better but we have to work really hard. The situation is still very fragile.”
Life remains grim for many Greeks. There can be few more poignant measures of the social cost of the crisis than the unusual Christmas “tree” that has been erected in Athens city centre for the last eight years. Organised by an NGO, Médecins du Monde or Doctors of the World, it consists of tins of milk, canned food and packets of rice and beans, which are donated to people in need during the holiday season. The food products are stacked in a pyramid and decorated with candles, to provide a festive touch.
While the fortunes of some companies are picking up, many are struggling to secure loans. Greek banks are lumbered with record levels of bad loans, amounting in some cases to half of their portfolios, and are wary of lending out more money.
Businesses are still handicapped by Byzantine bureaucracy and a failure by successive governments to reform the judicial system.
In the World Bank’s latest survey on the ease of doing business in 190 countries around the world, Greece comes in at 67th, putting it on a par with Albania, Jamaica, Morocco and Vietnam.
“Is 2.5 per cent growth feasible? Potentially yes, but the key question is whether it is sustainable – is it down to a new model of growth?” said Mr Piccoli.
“They have done plenty of structural reforms, but nobody has focused on growth. All the focus has been on cutting costs, privatisation and pension reform.
“Both the government and opposition are talking about the same old mixed bag of tax cuts, incentives for sectors like tourism and the hope that Europe will concede more. The economy is still very fragile.”
There is, nonetheless, optimism in some quarters that the economy is tentatively improving, that the long nightmare is perhaps coming to an end. “This is a fortunate moment for Greece,” Iannis Mourmouras, the deputy governor of the Bank of Greece, said in a speech in London this month.
“After eight years of economic hardship, we can say with confidence that there is light at the end of the tunnel for the Greek economy.
“This is not the right place to ask what went wrong in Greece or to assign blame. What is important today is to look forward.”
But even if 2018 brings a tentative recovery, it will be a very long time before Greeks regain the standard of living they enjoyed before the crisis.
“It will not be until 2025 or 2030 that Greeks will reach the levels of prosperity they had back in 2009,” said Panagiotis Petrakis, a professor of economics at Athens University.
“Every year will feel a little bit better, but the recovery is going to be very, very slow. I think most Greeks are still pretty pessimistic.”