ECONOMY

New migrant system puts fresh strain on Greece’s tight budget

new-migrant-system-puts-fresh-strain-on-greece-s-tight-budget

An EU deal with Turkey may severely limit an influx of migrants to northern and central European countries, but could place fresh strain on the budget of Greece, the frontline state that is already struggling to rebuild its public finances.

In December, when Greece expected to remain merely a transit country for migrants heading northwest, the central bank put the annual cost at 600 million euros, or about 0.3 percent of national output, well short of the 700 million euros the European Union has promised in aid over three years.

Now, though, with countries to the north having shut their borders and a new arrangement in place, it finds itself obliged to host over 50,000 refugees stranded in Greece.

In theory, once it has processed their asylum applications and deported them, most of that burden should go, because the deal is supposed to remove the incentive for the migrants to make the lethal unofficial crossing of the Aegean Sea from Turkey.

In practice, more are still arriving – 1,662 in the 24 hours to 7 a.m. on Monday – either unaware of the new arrangement or undeterred by it, with calmer, summer weather to come.

A central bank official told Reuters on Monday that the bank had asked the government to update its estimate of the costs, which also did not take into account collateral damage to tourism, particularly at the frontline islands including Lesvos and Samos.

With unemployment at 24 percent and many Greeks in poverty after a deep and prolonged economic depression, Greece is already struggling to meet the terms of the latest of three EU/IMF bailouts that have rescued it from bankruptcy.

If Greece had to pay 600 million euros a year from its own budget, that would translate to about a third of the fiscal savings that Athens is making through pension cuts and tax hikes to satisfy its lenders.

“If the foreseen contribution of the European Union turns out to be insufficient, it would result in added pressure on the Greek budget,” the Organisation for Economic Cooperation and Development said in a report on the economy last week.

If the crisis intensified, it warned of “severe implications for growth and fiscal balances”.

[Reuters]