Papandreou’s Summer Pay Cuts Keep Cash-Strapped Greeks at Home
Aug. 13 (Bloomberg) — Eleni Alexiou says she can’t afford to take her two children to a Greek island on vacation this year after the government axed her summer bonus and reduced her pay.
“We’re not going anywhere, just any place that friends and family can put us up,” said Alexiou, 38, a state employee at a citizens’ advice bureau in Athens. “The crisis is the reason. The summer bonus has been cut. Everything’s gone up in price.”
Alexiou is at the sharp end of Prime Minister George Papandreou’s measures designed to meet the requirements for 110 billion euros ($141 billion) in rescue funding from the European Union and the International Monetary Fund. As well as squeezes on pensions and higher taxes, it’s the first time Greece’s 768,000 state workers haven’t received the traditional extra 15 days of salary paid in the summer as Greeks decamp to the beach.
Lower spending on hotel rooms, flights and ferry trips is translating into a drop in revenue for the tourism industry, which the London-based World Travel and Tourism Council estimates accounts for about 16 percent of Greece’s 237 billion- euro economy and more than one in five jobs.
The effects of more thrifty locals along with discounts to lure foreigners mean revenue may fall 9 percent this year even as the number of visitors from abroad is little changed, said Andreas Andreadis, president of the Hellenic Hotel Federation.
“The Greek consumer is very scared at this point and very pessimistic,” said Andreadis. He reckons Greeks account for a fifth of the tourist industry and revenue from them might decline 20 percent in 2010. “There’s a significant fall in domestic tourism. More Greeks are staying home.”
Traffic and port authorities are reporting less movement than usual before the Aug. 15 exodus, when any Greek who hasn’t already gone on holiday leaves.
Airline companies are reporting a dip in demand on their domestic networks. Aegean Airlines spokeswoman Roula Saloutsi said the drop in recent months is by as much as 15 percent from a year ago, even with a decline in fares.
Visitors to Rhodes on charter flights, which primarily come from outside Greece, rose 11 percent in July, according to the island’s airport. The number of domestic tourists in the month, though, fell 17 percent.
Antonis Katsigouras, 40, who works in a shoe store in central Athens, said business is unusually brisk for an August. “People obviously aren’t going on holiday,” he said.
Long deemed to be part of an ordinary income, bonus payments provided a spending lift for Greeks when most needed: one month’s wage at Christmas, and half each at Easter, which is the biggest holiday in Greece, and summer. The payments are “unsustainable,” the IMF said in May.
Eliminating the “doro,” or gift, as the payments are known, will help save 1.1 billion euros this year. Cutting payments to pensioners will save another 1.5 billion euros. The government’s aim is to whittle the budget deficit to 8.1 percent of GDP this year from 13.6 percent. The limit is 3 percent for euro members like Greece.
The economy contracted at an annual rate of 3.5 percent in the second quarter, the statistical office said yesterday.
INKA, the national consumer rights group, said 59 percent of Greeks this year won’t take a vacation, an increase from 48 percent last year. The Athens-based institute surveyed 980 households between July 9 and July 13.
Seventy-two percent of those planning a holiday will cut back the number of days they spend away, 45 percent will stay at their own home and 27 percent would stay with a relative or friend. Only 28 percent of those taking holidays this year will stay at a hotel or in rented rooms, the poll found.
“Greeks don’t have the financial ability to take holidays,” said Georgios Lehouritis, president of INKA. “Two reasons: expense and wage cuts. A civil servant with a four- member family who is now getting a summer bonus of 188 euros — that’s not going to get him very far.”
To entice Greeks, Louis Plc, the biggest publicly traded tourism company in Greece and Cyprus, is offering discounts of up to 20 percent and deals such as two children staying free. Shares in Nicosia-based Louis have fallen 25 percent this year.
Spokesman Michalis Maratheftis said Greek bookings at the company’s 10 hotels are little changed from last year.
Greeks spend more of their vacation time in their home country compared with other Europeans, according to research by Alpha Bank SA, the country’s third-largest lender. Spending on holidays abroad was 1.1 percent of gross domestic product in 2006, 2007 and 2008 compared with 2.5 percent for Germans and 2.6 percent for the British.
Alexiou, who left her children with friends during the summer vacation, said rising prices are making her think twice about traveling to see them while she works during the week in downtown Athens. An increase in fuel taxes has helped boost Greek inflation to the fastest in the 27-nation European Union. In July, the rate rose to a 13-year high of 5.5 percent.
“You go to the supermarket these days and spend 50 euros and it’s not even two grocery bags of things,” said Alexiou, who made 17,000 euros a year before the cuts.
Gerasimos Barounos, 39, took his wife and one-year-old son to the island of Zakynthos for a week, the first holiday in two years. With his annual salary cut by 1,200 euros, he opted for a cheaper hotel and cut back on eating out. His annual bonuses were replaced by a lower, flat rate.
“I went on a much tighter budget, for fewer days,” he said. “It’s compounded by the fear of the general situation that I may experience further salary cuts.
Katsigouras, the shoe-shop manager, said he will take holidays later this year to take advantage of cheaper prices on his preferred destination of Folegandros, a smaller island more popular with Greeks than foreign tourists.
“I get one holiday a year and spend the entire year looking forward to it,” he said. “We have to keep some things to get through this crisis.”
To contact the reporter on this story: Maria Petrakis in Athens at email@example.com .
Find out more about Bloomberg for iPhone: http://m.bloomberg.com/iphone/