Along with most economies in the world, Greece's economy has been hit with an unprecedented downturn. A situation that very soon could make conditions seen in the country in 2012 and 2015 look like child's play.
As of Saturday morning, the country's economic landscape consisted of thousands of businesses that have been locked up, with the remaining ones (except for supermarkets and pharmacies) showing a sharp decline in business activity. On Saturday, the first day were restaurants and cafes forced to close, market images were shocking: empty shopping malls and roads reminiscent of the August 15th summer holiday peak.
Today is an extremely critical day for Europe. If the Eurogroup does not take bold steps to tackle the situation, and overcome taboos and obsessions, to do what is needed, then the problem may become unmanageable.
Even in the worst days of Greece's economic crisis, which brought our country to the brink of a eurozone risk, strong growth in tourism offset the downturn, drawing billions of euros stimulating the industry, consisting of thousands of businesses and professionals. At the same time, the development of the short term property rental market stimulated the real estate sector, ending the collapse of prices by turning thousands of vacant apartments into valuable assets and providing income to thousands of people.
The economic collapse that has been taking place in recent weeks has been unprecedented: thousands of overnight cancellations in AirBnB apartments, occupancy rates at Athens hotels at less than 20 percent, unprecedented cancellations in summer destinations, empty shopping malls, brakes drawn on trucks transporting industrial products and raw materials, large companies with a strategic role in the economy, such as Aegean, cancel flights, shipping hit, investments freeze, and consumption contracts. Teachers, musicians, and actors have been left without income in a situation that cannot be prolonged for many days without dramatic consequences.
If we don't soon get back to normality, then this crisis will turn into an economic disaster.
State aid: a one-way road
The good scenario ahead foresees that the drastic measures taken in Europe and America halt the spread of the epidemic and soon there is a return to normal, along with rapid recovery of losses. Last week, Alpha Bank economists estimated that the epidemic would pull the brake on the Greek economy's growth momentum, by trimming up to 0.9 percent from growth this year, assuming that the impact will be short-lived and last until the end of the third quarter.
Even if things turn out that way (with a short duration period), then the collapse of tourism and the shutdown businesses will be difficult to overcome without generalized help to boost business liquidity. The restoration of normality and confidence in the economy will require extensive state aid.
The market today is waiting for the Eurogroup to take courageous decisions and measures to stimulate the European economy and handle pressures caused by the epidemic. Otherwise, the situation will be unmanageable, not only for the vast majority of businesses but also for the country as a whole.
The crisis triggered by the virus concerns not just one industry but, without exaggeration, everything.
Talk that the Greek government will provide state aid to specific businesses that have shut down makes no sense as, in reality, everything has been hit. And when there is no revenue, no payments can be made. Without payments, everything will quickly be swept away by a massive financial tsunami: workers will be without income; consumption, banks, public revenues, and social security contributions will collapse.
Some European countries have already announced they will provide interest-free long-term loans so that businesses and professionals can obtain the necessary liquidity to meet their obligations.
Last week, the US, Europe, Australia, Canada, and other countries announced large-scale liquidity boosts and moves to protect their financial systems. Late last night, the US announced a new set of measures to curb the economic impact of the coronavirus.
The big question, however, is how all this aid, exceeding $2 trillion, will be channeled into businesses and the real economy.
Yiannis Papadogiannis
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