2/15/2016

An Ailing Economy


The refugee crisis is testing the limits of Greece’s flagging economy, jeopardizing its ability to handle a flow of refugees that shows no signs of slowing.

Added to the existing strains of austerity, the renewed economic pressure from the crisis is stoking fears within the Greek government that a new wave of anti-refugee xenophobia could take hold unless the European Union and Turkey significantly step up to help manage the crisis.

A report by Yannis Stournaras, the governor of the Bank of Greece, confirms as much. 

The report, presented to the European Central Bank’s general council on Dec. 17,compiles existing research on the economic effects of the refugee flows to demonstrate the risks the crisis poses for Greece.

“The continuation/worsening of the [refugee] crisis adds a downside risk factor to the Greek economy’s outlook,” Stournaras argued.That the message came from Stournaras, a finance minister from 2012 to 2014 under the previous center-right government, strengthens the claims.

The increased public spending to absorb the thousands of refugees arriving on Greece’s shores every day will amount to 0.3 percent of GDP this year, or 600 million euros, Stournaras says in the report, citing government estimates.

These expenses will force difficult tradeoffs since they occur"at a time of strict fiscal retrenchment," the report notes.

The report also observes that the massive influx of asylum seekers, the majority of whom are Syrian, has been particularly disruptive to the tourism industry on Greece’s islands and to international trade, which relies on unfettered access to Greek sea lanes.

The vast majority of refugees that arrive in Greece continue onward to wealthier European nations, in particular Germany and Sweden, which have until recently been relatively welcoming.

But with a growing number of neighboring nations closing their borders to asylum seekers coming through Greece it is likely many more refugees will remain in the country, which means the government will also incur expenses to ensure refugees’ semi-permanent housing, food and health care, according to Stournaras' report.

Ironically, wealthier destination countries for asylum seekers, such as Germany, have the greatest potential to benefit economically from the arrival of refugees, the report states, since they have labor shortages in high-skilled sectors that might be filled by new arrivals.

Greece, the main transit point for refugees reaching Europe’s shores, is among the countries least economically equipped to deal with the influx.

(Some 84 percent of asylum seekers who reached Europe by sea in 2015, and 92 percent this year,have come through Greece, according to the United Nations.)
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