Greece Might Just Get a Boost From an Unlikely Source

The cash-strapped nation stands to gain a lift to demand from the aid effort for refugees

Was the Greek Debt Crisis a Cautionary Tale for the U.K.?

As European Union leaders gather in Brussels on Thursday with the refugee crisis on the agenda, some of them may repeat the claim that their economies can't bear the cost of aiding people fleeing war and persecution. Greece ought not to be one of them.

After all it has been through in the past six years, the arrival of tens of thousands of refugees from across the Aegean may in fact be giving the country a mild, short-term stimulus.

Hundreds of millions of euros have been spent so far to provide shelter, provisions, and support to migrants and asylum seekers, in a period when government-funded spending has taken successive cuts.

Thousands of staff, from social workers to engineers — both from international and non-governmental organizations — as well as local contractors, have been deployed to support the gigantic operation of hosting more than 60,000 people stranded in Greek facilities.

A government-commissioned study from April this year, shows that the impact of that effort on Greek gross domestic product could range from neutral to positive by 0.3 percentage points. Having won an exemption for refugee spending from budget targets, it's the positive scenario that's now more likely to materialize. 

A guide to the refugee crisis

The European Commission says that it has approved almost 200 million euros ($220 million) in funding for projects related to the refugee crisis in Greece this year. That may not look like a huge amount, but this consumption boost comes at a time when money in Greece is so tight that total spending on investment from government coffers is just over 700 million euros a year.

And given that the Commission forecasts an economic contraction of 0.3 percent in 2016, the boost from aid spending and associated demand could make the difference between contraction and breaking even.

The burden for Greek taxpayers this year, net of external sources of funding, is projected at 54 million euros, about 0.03 percent of the country’s GDP, according to the draft 2017 budget.

"Concerns about the capacity of the Greek economy to accommodate the burden of refugees are likely to prove overstated," said Sotiria Theodoropoulou, a Brussels-based senior researcher at the European Trade Union Institute. "Insofar as EU and other international organisations' funds are secured to cover the costs of hosting refugees, the additional costs of public service provision can be covered and in fact, new staff can be recruited, thus providing a small boost in the Greek economy. " 

If that's welcome news at a time when Greece is trying to keep its finances on track and its creditors satisfied, there's more: Concerns about the refugee crisis scaring off foreign visitors have also proven to be overdone. 2016's tourism take is likely to be right on target.

With assistance from Jonathan Stearns, Albertina Torsoli and Eleni Chrepa


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