With a 7.5-billion-euro bailout tranche virtually secured, Greece could settle down on Friday to watch the start of the Euro 2016 soccer tournament without any concerns about whether the loan will be disbursed. The Greek national team has not qualified for this year’s edition of the European Championships, which means local viewers will perhaps follow the event with a tinge of sadness that Greece finds itself shut out of European proceedings – a common theme in political and economic developments over the last few years.
The road to recovery for Greece (the country, rather than the soccer team) runs through its tormented economy. In the past, Greek success on the pitch (triumph at Euro 2004, qualification for Euro 2008 and quarterfinals at Euro 2012) has been the result of blending several strengths: good organization, team spirit, a strong defense and effectiveness in counter-attacks and set pieces. In contrast, Greece’s economy seems like a one-trick pony that repeatedly relies on a thriving tourism sector to get it out of trouble.
According to a report earlier this year by the World Travel and Tourism Council (WTTC), travel and tourism directly contributed 13.3 billion euros (or 7.6 percent of gross domestic product) to the Greek economy in 2015.
However, when one also takes into account the indirect and “induced” economic impact – which includes factors such as investment and the supply chain involved in providing for the tourism sector – the contribution is seen at an impressive 32.5 billion euros, which is close to a fifth of the GDP.
Tourism is largely delivering again this year. Travel receipts for the first quarter surpassed 500 million euros, matching the performance of the same period last year, aided by increases in the number of arrivals from Russia and the US, as well as the UK, France and Germany.
According to the Association of Hellenic Tourism Enterprises (SETE), international tourism arrivals at the main Greek airports grew by 6.5 percent in April year-on-year and by 7.6 percent over the first four months of the year compared to 2015.
That is not to say it has all been plain sailing. The recent protests against the privatization of Piraeus Port Authority (OLP), the refugee crisis and the general uncertainty surrounding Greece over the last few months have caused setbacks.
Turnover in the accommodation and food service sectors, for instance, fell by 11.7 percent in the first quarter of the year and hit the lowest level since the first quarter of 2013.
Nevertheless, SETE still expects foreign arrivals this year to reach 25 million, which is a rise of 1.5 million compared to the record year of 2015. Direct tourism revenues are also seen hitting a record sum of 15 billion euros.
The flourishing of the Greek tourism sector during a gruelling period for the country can be put down to a number of factors. These include the abiding appeal of Greece as a holiday destination, the instability in the region that led to travelers avoiding some foreign resorts and reduced prices, despite the repeated tax hikes.
Greece’s tourism sector is bucking the trend in the Greek financial crisis because it has managed to do certain simple things well, essentially making it the country’s most significant export by far.
The challenge for Greece, though, is to augment this by helping other sectors of its economy grow. Tourism alone cannot be the source of a decisive turnaround.
For instance, while tourism forges ahead, Greece’s exports continue to suffer. Last week, the Hellenic Statistical Authority (ELSTAT) announced that the country’s trade deficit rose by 21 percent in April on the back of imports rising by 7.1 percent and exports falling by 3.8 percent. Worryingly, this was the twelfth consecutive monthly fall for exports.
Greek exporters continue to be plagued by the problems that have dogged them throughout the crisis. This includes a lack of liquidity, problems accessing finance, an unstable politico-economic environment and a lack of business-friendly measures.
The Organization for Economic Cooperation and Development (OECD) expects exports to drop by 1 percent this year before shooting up by 5.7 percent next year.
However, the Paris-based think-tank believes there must be certain preconditions for this recovery. Apart from political stability, the OECD stresses the need for reforms that will simplify regulatory procedures and ease the administrative burdens on Greek companies.
The message is that reviving the export sector will be a complicated task. There is no magic solution. The truth is that Greece’s internal devaluation, which has seen employees’ compensation fall by roughly 30 percent since 2009, has not aided Greek exports in the way that many had expected over the last few years.
Greece has gained some price competitiveness due to the sliding wages, which has helped the tourism sector, but this has not translated into a boost for exports, which face a set of more complex challenges, argues Christian Odendahl, the chief economist at the Center for European Reform in London.
“Pure price competitiveness is a flawed concept: Companies also need to invest in innovation, marketing, technology and – yes – people in order to remain competitive,” he told Kathimerini English Edition.
“Tourism is more price sensitive and does not require as much investment, since Greece is spectacular as it is. This means that in tourism, the price effect could dominate. But in other businesses, prices cannot fall fast enough to compensate for the lack of investment and innovation.”
All of which takes us back to the blend of components that helped the Greek national soccer team overachieve for so many years. If Greece wants an economic recovery, it cannot rely on just one sector, and if its exports are going to be successful then a combination of factors are needed to help the flourish. At the moment, these elements are absent on and off the pitch. Greece will have to settle for a summer of watching others prosper.