Greece wants to negotiate new fiscal targets with its euro zone creditors as the coronavirus crisis pushes its debt pile to almost 200% of gross domestic product (GDP).
Greece, which has been through three bailout programs over the last decade, agreed in 2018 to reach a primary budget surplus — when a government’s revenues are higher than its spending — of 3.5% until 2022. Though this required level of surplus limits the government’s ability to spend, it came in exchange for softer debt repayment conditions.
However, as the coronavirus pandemic brought the Greek economy to a halt, the country’s finance minister told CNBC he will be discussing new targets with his euro zone counterparts.
“Taking into account what the Eurogroup (of euro zone finance ministers) decided recently, we don’t have these targets in 2020 and we will discuss as Europe, at the Eurogroup, the targets, the rules and the requirements for 2021 onwards taking into account the response to the coronavirus crisis,” Christos Staikouras, Greece’s finance minister, said Tuesday.
In the wake of the pandemic, European policymakers agreed in March to lift fiscal targets for each member country, giving them more leeway to tackle the unprecedented economic shock. However, this is meant to be a temporary measure in response to the economic crisis across the European Union.
The European Commission, the executive arm of the EU, forecast in May a debt-to-GDP ratio of 196.4% for Greece in 2020 and of 182.6% in 2021. In 2019, Greece’s debt pile stood at 176.6% of GDP.
“According to the European Commission, we will not have the largest increase in debt-to-GDP in 2020, we will be the fourth-largest increase, but we will have the largest decrease of this ratio in 2021,” Staikouras told CNBC, saying that Greek debt is sustainable.
One of the main uncertainties for 2020 is the performance of the tourism industry.
“The percentage of this year, of 2020, economic decline depends to a great extent on the performance of tourism,” Staikouras said.
Greece hopes to welcome the first tourists from June 15 onward, as it begins a phasing out of travel restrictions. This means there will be no test requirements for the virus before arrival, or a quarantine period once inside the country.
Greece has been described as a somewhat successful country in containing the spread of the virus. According to Johns Hopkins University, there have been 2,918 confirmed cases and 179 deaths from Covid-19 so far. The Greek government hopes that the low infection rate will convince tourists that the nation is a safe destination for tourists.