The situation in Greece has been blown up in the media in the last week, and with good reason. Their financial crisis has gone on for longer than anyone would have thought, and now it’s at a point that tourists are starting to cancel their plans to travel there. If there was ever a time when Greece needed tourism dollars, it would be now.
I don’t profess to be an economic expert, but in a very simple nutshell the situation is this. Greece joined the Eurozone in 2011, and there was a big boost in the confidence that foreign investors had in the Greek economy because of it. After the Global Financial Crisis of 2008, everything changed. Every single country in the Eurozone entered a recession, but some were hit harder than others. Greece was among the poorest and most indebted countries, and it suffered the most. Unemployment rates reached 28% in 2013, which is worse than what the US suffered in the Great Depression in the 30s.
If Greece wasn’t in the Eurozone, they could have boosted their economy by printing more of their own currency (the drachma, which is what they were using when I went there last!) Now, this would have lowered the value of the drachma in the international market, but it would also lower domestic interest rates, encouraging domestic investment and making it easier for Greeks to service their debts.
Alas, Greece shares its monetary policy with the rest of Europe. The German-dominated European Central Bank has given Europe a monetary policy that’s about right for Germany, but it’s so tight that it has thrust Greece into a depression. So now Greece is squeezed between a crushing debt burden (177% of the GDP, which sits at about twice the level of the US currently), and a massive depression that makes it hugely difficult for them to raise the money required to make their debt payments. For the past five years, Greece has been negotiating with various entities including the European Central Bank for assistance with their financial burden. Since 2010 Greece have been provided with more loans in exchange for tax hikes and spending cuts to bring their debt under control.
Rich European nations such as Germany believe they’re simply insisting that Greece live within its means. But the severe terms of the bailouts have caused resentment among Greeks and contributed to crisis-level unemployment and poverty. In January 2015, they elected a new left-wing prime minister, Alexis Tsipras, who promised to reject the previous bailout deal and secure a more favourable agreement.
Unfortunately he has very little leverage. In 2010, Greek debt was widely held by private banks, so a Greek default could trigger a financial panic worldwide. But since then, this debt has been consolidated in the hands of rich European governments, greatly reducing the risk of another global financial crisis if Greece defaults. Greece now faces a hard choice: it can accept the demands for further austerity, or it can defy the terms of the loans, which would likely lead to a default on Greek debt and possibly a Greek exit from the Eurozone. The Greek government is holding a referendum on July 5 to let voters choose between these bad options.
In the meantime, the Greek economy is melting down. Knowing that Greek euro deposits could soon be transformed into devalued drachma deposits, Greek people have been rushing to ATMs to withdraw as much cash as they can. That has forced the Greek government to close the banks and limit withdrawals to €60 per day. As at today, banks have been closed for six days, and there doesn’t seem to be any chance of them opening prior to the referendum in July.
Now what does all this mean for tourism?
The fact that banks are closed means getting your hands on some cash will be hard. However, the €60 daily limit only impacts Greek nationals. Tourists with foreign bank cards are still able to withdraw larger amounts, but getting access to money changers might be a problem. I would recommend you enter with Euro in CASH, rather than taking your pounds or dollars in and expecting to be able to change those in a bank.
Aside from this, all the normal precautions for travel to countries that are about to have a fairly important vote should be undertaken. Steer clear of any protests of rallies, stick to the normal tourist areas. My sources tell me that most travellers aren’t even being disrupted by the bank closure, and I know that the Australian travel advice is currently sitting at the lowest possible level. If you are in Greece currently, then you have no reason to be worried, but if you are not due to travel for a little while then keep an eye on the news and decide for yourself how comfortable you would be going. Keep in mind that mass media reports should be taken with a grain of salt, as they often blow things out of proportion (yes, I’m looking at you Rupert Murdoch.)
Realistically, Greece needs your tourist spending now more than ever – so support her. She’s a beautiful country with a lot to offer.