The Economic Effect of the Refugee Crisis on Greece

– Emma Fabreguette

In 2015 over 885,000 refugees arrived in Europe; fleeing from political unrest in Middle Eastern states (e.g. as Afghanistan, Pakistan and Nigeria), and from the Syrian Civil War. The main access to Europe was from Turkey to Greece via the eastern Mediterranean Sea; as its coastal borders are approximately 4 km away.

This report will analyse the effects of the mass influx of refugees into Greece, specifically the Greek island of Lesbos. In doing so, a general economic background of Greece will be discussed; to understand the conditions in which Greece was when the refugee crisis occurred. Secondly, the domestic handling of the refugee crisis by the Greek government and society, and externally by the international committee, will be evaluated. Lastly, a set of specific and general recommendations will be provided to improve the current refugee situation in Greece; looking to include internal and external cooperation to improve current and future refugee problems.

Background

In the early 1990’s The World Development Indicator recorded that Greece had a 23.3% GDP coming from net borrowing. This has been the highest record of net borrowing recorded from Greece to date; and was attributed to its intensified attempts to develop its economy, especially boosting the service sector. Greece achieved a 9% increase in the service sector’s contribution to annual GDP (from 72.9% in 1990 to 81.1% in 2010), and the highest GDP annual growth ever recorded from 1990 to 2006 of 3.9%.

In 2001, Greece became a member of the Eurozone. This allowed Greece to have easier access to trade within Europe by transitioning its currency to Euro. By becoming part of the Eurozone, Greece was able to loan greater sums of money from its Eurozone partners such as Germany and France, for lower interest rates.

Despite this economic benefit, by 2007 GDP annual percentage growth fell from 3.3% to -0.3% in 2008. Greece’s GDP annual growth percentage steadily declined until its worst in 2011, reaching -9.1%. This economic depression can be linked to many various factors, one of them being that Greece had been loaning so much money that it eventually became acknowledged that their loan had become too large to repay. By 2009, it was revealed that the percentage of GDP coming from borrowing would be 15.1%; the highest amount of borrowing since the early 1990’s.This sparked a fear that Greece would have to default its debt to the Eurozone states. Consequently, in 2010 a €110 billion bailout was granted by the International Monetary Fund (IMF) and European Commission.

For Greece to repay this bailout austerity policies such as public spending cuts in pensions and public services, while increasing overall taxes (from 19.8% GDP in 2009 from tax revenue to 24.7% in 2015) were applied. Not only did this indebt Greece even more, as it now had to repay significant amount under the bailout, the austerity further shrunk the economy; as less people were able to spend money on consumer goods.

The new focus on repaying this bailout contributed to the 59% current GDP drop from 2009 to 2015, This damaged the local tourism and forced businesses to lower their prices to be able to avoid bankruptcy. By 2010, a quarter of Greece suffered unemployment. It is important to understand Greece’s economic history to properly analyse how the refugee crisis was handled. The ongoing economic decline of Greece throughout 2009-15, combined with a poor migration management and police system, were factors which contributed to a failure of control and mis-regulation of the mass influx of 473,000 refugees in 2015.

Context

Greece’s government failed to adapt its migration policies when the mass influx of refugees arrived. The process of asylum request was extremely slow due to the migration offices’ lack of organisation and external support from the European Union (EU).

Greece was already in the depths of a significant economic crisis; with no availability of funds to support the hundreds of thousands of immigrants arriving on a daily basis. In addition, the EU did not make any serious decisions, did not provide any significant funds to help with this process, and closed most EU border routes in an attempt to prevent the migrants from entering other EU member states (Austria, Germany etc.). The migration government agencies were severely understaffed throughout the refugee crisis, and there was limited available migration services and access to crucial information for the refugees.

Consequently, the majority of refugees were stuck in camps that were in poor conditions. As an example, In Lesbos alone the island’s maximum capacity for sustaining 3,400 refugees was overshadowed by unanticipated realities; as over 5,400 refugees were present on the island in September of 2016. This was partly attributable to underfunding from external sources in Europe, where EU member states failed to see Greece’s refugee crisis as a collective European crisis, and partly due to the unfortunate geographical location of Greece; where the country exists as the most convenient point of entry into the EU for refugees.

The islands where migrant made shore often contained less than a few thousand inhabitants; meaning that there were scant resources to provide the massive influx of people with food, shelter, medical assistance and other necessities. The EU did not assume any precautionary measures, and nor provide sufficient assistance to combat the crisis.

Additionally, while a variety of non-government organisations (NGO) sought to render humanitarian assistance, there existed a number of them possessed ulterior motives to profit off the back of this humanitarian crisis. Indeed, while a significant volume of humanitarian resources were contributed to the crisis, a large proportion of this aid did not reach its intended target. Many of the NGOs were not Greek organisations, but international ones.

Underfunding of the camps by the Greek government of contributed to rising tensions. Many refugees residing in the camps, when interviewed, described these camps as “filthy, crowded and unsustainable”. In September of 2016, a suspicious fire was set in the refugee camp on Moria, Lesbos; forcing 4,000 migrants to flee. According to French media, the fire was set by a refugee within the camp in protest of the poor conditions that they were forced to live in.

However, it is important to note that the majority of persons within the influx of refugees do not desire to settle down in Greece. As stated by the Greek Interior Minister, “Greece is not the final destination of these refugees, it is just a transit to Europe”. The majority of the 150,000 asylum seekers that arrived between January and March 2016 considered Greece as a route to their final destination of Northern Europe. The majority of the fleeing refugees entering Greece were “from Syria, then Afghanistan, Pakistan and then Nigeria” (Greek Interior Minister). Nonetheless, the neighbouring countries of Greece (Bulgaria, Macedonia and Albania) built fenced borders to keep refugees out. Hence, refugees were trapped in Greece with nowhere to go but refugee camps, mainly concentrated in the once tourist packed areas of Lesbos.

Analysis

A major source of Greece’s GDP comes from the tourism industry. In 2015, prior to the refugee crisis, tourism accounted for 19% of Greece’s annual GDP, equal to USD$19.5 billion. There has been an average of a 2.4% annual increase of total tourists coming to Greece since the 1960’s. The tourism industry has therefore become the largest source of foreign exchange, and primary source of employment for locals.

Especially in Greece, the tourism industry has become the largest service sector due to the country’s abundance of historical sites and scenic vistas. This has therefore made Greece heavily reliant on achieving a stable economy. Statistics show that in the worst peaks of its economic crisis (2009) a -6.6% GDP drop in contribution from tourism occurred; equal to a USD$3.7 billion drop in a year. Such a circumstance illustrated the close correlation between economic stability and tourism. By early 2015, Greece’s tourism GDP contribution had rose to 19%, the highest of all time.

However, since the refugee crisis in June 2015, loyal and potential tourists have turned away from coming to Greece. Tourists have shown particular aversion to visiting the Island of Lesbos, the third largest island in Greece, and a location which is one of the main contributors to the tourism industry. Lesbos is located only a few miles away by sea from the coast of Turkey, and has become the major landing zone for refugees fleeing the political unrest in the Middle East. In mid-2015, a 70% drop in hotel bookings in Lesbos were recorded.

Tourists no longer view Lesbos as a tourist destination, but as a refugee landing zone. With over 85 boats of refugees arriving every day in 2015, tourist “charter flights went from 25 a week to only 10”. Even a year later in 2016, the tourist season in Lesbos was still suffering; with a recorded -2.2% GDP contribution drop. Many cruise ships, travelling agency deals, and even plane flights had been cancelled; causing drastic drops in sales for the tourist industry and driving businesses near bankruptcy. Many factors contributed to the drop of tourism in Greece that could have been avoided and may have reduced the impact of the refugee crisis.

Firstly, the majority of refugees arriving on the beaches of Lesbos landed 60 km from their desired destination of Mytilene, island’s capital. Greek law also prohibited taxi drivers from assisting refugees to travel free of if they were undocumented persons. Therefore, for these refugees to travel to Mytilene they had to walk. Refugees filled the highway sidewalks, making it highly visible to tourists that a refugee crisis was underway. Following increased publicity owing to social media, tourists were reluctant to come to Greece in fear for their personal safety. The Greek government was unable to establish transportation facilities for refugees to travel to their destination; as these refugee landing zones are small islands lacking sufficient infrastructure. The incompetence of the Greek and EU governments were on display to tourists; causing tens of thousands of vacationers to cancel their plans to Lesbos resulting in unemployment due to the lack of tourism. This was evident in the 55% unemployment statistic for the tourism industry in 2015.

Secondly, humanitarian resources were not readily available, and local institutions were not prepared for such a significant crisis. Simultaneously, local administrations had already received big cuts in their budgets by the central government due to the austerity measures enforced under the loan agreement with the IM and EU.

Thirdly, in 2016 a café owner in Lesbos interviewed by international media detailed how no NGOs were present to assist at the beginning of the crisis; and it was only the goodwill of the islanders that provided food and shelter to refugees. It took over 4 months for the first official NGO to arrive in Greece.

Fourth, the Greek government was severely unsupported by Europe in terms of funding and administrative assistance for existing refugees. Instead, the EU focused on controlling its external borders to prevent more refugees from entering the EU. On March 18th, 2016, the EU and Turkey signed a deal to return any illegal immigrants arriving in Greece back to Turkey; seeking to persuade refugees not to come to Greece in the first place. However, this did not consider the primary reason refugees were fleeing, nor did it provide solutions to the current refugees that were in Greece.

While the refugees already in Greece proceeded onward to Northern Europe, many were restricted passage through Macedonia, Serbia, and Croatia. On November 18, 2015, the borders of these three countries were closed to all asylum seekers; with the exception of those originating from Syria, Iraq and Afghanistan. By 2016, the Balkan route was closed off completely by the Macedonian border. Therefore, significant numbers of refugees were inevitably stuck in Greece.

Recommendations

As Greece is located on the continental borders of the EU, bordering both Asia and Africa, the ease of access from the sea has made it a main route for migration. In 2015 around 885,000 refugees (a 1,742% increase from 2014) arrived in Europe through Greece, journeying via the eastern Mediterranean Sea.

During 2015 and 2016, several EU migration enforcements were applied to limit the legitimate access of refugees into Europe. This was done either partially, by making requirements for asylum extensive and near-impossible to obtain, or completely; by building fences on EU borders. Major routes of migration were severely restricted, as mass numbers of refugees attempted to reach Europe through Greece.

Efforts were invested in containing refugees within the transit countries of Greece (i.e. Lesbos) and Turkey, and at their points of origin Pakistan and Jordan. Indeed, refugees from Middle Eastern countries comprised the majority of the 1.56 million refugees within Europe in 2015. These events have stretched the economic resources and supply capacity of many EU countries and contributed to increased political and economic tensions.

Where the international community has failed to take responsibility for this crisis; a number of general recommendation can be issued to reduce the effects of this migrant crisis, and restore the tourism industry to its former state within Lesbos;

Redistribute the refugee burden evenly amongst the international community

It is necessary for EU member states and other stakeholders within the international community to carry their weight. This is particularly relevant to developed nations such as Europe or the West; as only 0.66% of refugees resettled in 2015 were within developed states. Whether it be financial or resettlement assistance, placing a primary focus on the most vulnerable refugees must be prioritised. For this to be possible, a re-evaluation of EU agreements such as the EU-Turkey deal (limiting access to EU) must be either abolished or amended; allowing allowing freedom of movement for refugees to continue their journey unimpeded.

Increase the accessibility of information for refugees

Increased welfare safeguards are required to distribute essential information on laws and regulations among refugees. This includes information relevant to refugees seeking to “apply for protection in developed states, humanitarian visas, private sponsorship, academic scholarships, labour mobility schemes, and medical evacuation”. Such a scheme will disperse the concentration of refugees stuck in Lesbos, and enable them to continue their route to Europe.

Promote stronger international organisation between NGOs and the Greek government.

The crisis is partly attributable to bureaucratic difficulties, which are exacerbated by the fact that much of the USD$803 million funding assistance in 2015 was directed by international aid agencies instead of the Greek government. This led to a series of inappropriate and misguided actions during the crisis; including building the largest IRC refugee camp in Lesbos in the wrong place. Instead, such funds would have been better spent on emergency assistance instead; including “shelter, cash, education and protection of unaccompanied minors”.

Implement work opportunities for refugees in low-skill jobs

Securing stable employment for refugees is key to reducing crime and poverty, while assisting Lesbos’s economy to recover from economic stagnation. The concept of government reserved jobs for refugees, while controversial, is an idea worth considering in achieving social harmony. This would not only help refugees by providing them with a livelihood and a source of income, but also promote the local economic growth of Lesbos.

Government collaboration with the tourism industry

Investment must be made by the government into reviving its stagnant tourism industry. This includes the implementation of agreements between the Government and tourism industry, such brokering deals with different agencies to promote international tourism to Greece. Strong funded advertising campaigns are highly recommended to help counter the prevailing image of Greece as a refugee landing zone. This could be achieved through social media and internet campaigns, promoting competitive hotel, cruise, airline deals

The limitations to these recommendations is that the final decisions do not rely upon the consent and scrutiny of IGOs, but rather multilateral collaboration of the international community. Implementation of such recommendations should be considered paramount in responding to the consequences of the refugee crisis in Lesbos, Greece.

By resolving the refugee problem first and foremost, the economic prosperity of Greece will follow, given the high correlation between social and economic stability.

In conclusion, it is paramount that we recognise the importance of describing this humanitarian issue as ‘Europe’s refugee crisis’ and not ‘Greece’s refugee crisis’. This is necessary in compelling the international committee to take on increased responsibility.

By redistributing the burden of this crisis, the international community will be able to ensure protection of the rights and dignity of each individual human and promoting physical and psychological wellbeing of each refugee.