COMMENT

What a Brexit could mean for Greece

LEONIDAS STERGIOU

TAGS: Economy, Society, Analysis

The British on Thursday voted to leave the European Union. A Brexit would have significant economic, social and political consequences for Greece, both short- and long-term. More worrying, it could open the way for a new round of speculation about a possible Grexit.

Britain leaving the EU would indirectly affect Greece in three main areas:

Economy

A devaluation of the pound would have a negative impact on real estate, tourism and Greek exports, as well as the income of a large number of Greek households with members studying or working in the UK. Consider the following data:

1. Real estate: According to Algean Property, more than 100,000 foreigners, mainly from Europe, the USA and Australia (about 60 percent) currently own property in Greece. The recent weakening of the euro against the US dollar and the British pound saw interest from potential buyers based in those countries rise by 10 percent. Thus, a weakening of the pound would be accompanied by a waning of interest in the Greek real estate market (residential, holiday, and hospitality industry).

2. Tourism: An estimated 2.4 million tourists from the UK visited Greece in 2015. Visitors from Britain represent 10 percent of total incoming tourism in Greece and 14.3 percent of total travel receipts (2 billion euros). The UK is the second biggest market for Greek tourism after Germany.

3. Education and employment: More than 400,000 young Greeks have left the country over the last six years to study or find work abroad. The UK is the most popular destination for education and employment among Greeks because of high level of spoken English in Greece (youngsters learn English at school) and their EU citizenship, both of which give them easier access to education and jobs. Especially in the education sector, Greeks are eligible for discounts available to all EU nationals.

If the UK leaves the EU, thousands of Greek students will lose those discounts, will need a visa for their education and so on. Moreover, Greek employees will lose the benefits that come from being EU residents. This change could prompt a considerable number of Greeks to return to their home country, or an increase in their living costs (in the case of young people, these costs are mainly covered by their families back in Greece).

Politics

A UK departure could set the scene for the next exit from the EU (and the eurozone) or, alternatively, end such speculation once and for all. The outcome depends on the day after in the UK, the EU and the eurozone.

Brexit would put pressure on the bloc to decide whether it wants “more” or “less” Europe. This will affect the eurozone – and more specifically Germany and France.

If the UK were to leave the EU, countries such as Denmark and Norway would likely be tempted to try to renegotiate their relationship with the EU and the eurozone.

If the catastrophic scenarios do not materialize, and Britain continues to attract investments, create jobs and see growth (following a short adjustment period), this will again open the discussion regarding exits, especially among big economies like Italy. However, speculation about Grexit would surface again, even though the Greek economy is not as big as Italy's. Grexit would be a likely scenario for two reasons:

1. Greeks are exhausted after six years of tough austerity measures.

2. Greeks would also see Grexit as a potential solution to the refugee crisis.

In this case, Greek and eurozone politicians would renegotiate political and economic ties from scratch, including the bailout programs, the issue of debt, and the refugee crisis. Moreover, other exits cannot be ruled out.

On the contrary, if Brexit proves to be a bad decision, triggering big economic, social and political problems for the UK, then Euroskepticism will largely disappear.

Society

Greek society will be affected in two ways:

1. Greeks will lose one of their most popular alternatives for employment and residency.

2. Many Greek students and employees in the UK will be forced to return to Greece. Other English-speaking countries (like the USA, Canada or Australia) are less attractive alternatives. These countries are further away and the cost of education (especially in the US) is higher. A large number of Greeks abroad would be forced to return to unemployment-hit Greece. Greece would have to receive a fresh wave of “migrants” – this time Greek nationals.

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