Greece’s Fragile Economy Faces New Tests After Brexit

“Our effort to exit the crisis becomes more complicated because this decision disrupts our economy,” says one Greek politician.
 06/27/2016 04:14 pm ET

The Huffington Post

The United Kingdom’s decision to leave the European Union in a so-called “Brexit” has sent shocks through Europe, raising questions about the continent’s political and economic future.

Markets around the world plunged in the wake of the unexpected referendum results. The Athens stock exchange fell by 15 percent in the immediate aftermath of British voters’ decision, while bank shares dropped by 30 percent.

Greece’s already-fragile economy faces new challenges in an increasingly unpredictable post-Brexit world. Especially worrisome are the potential effects Britain’s decision could have on two of the country’s essential industries: shipping and tourism.



HuffPost Greece asked Greek politicians and economists about the immediate and long-term repercussions the Brexit could have for their country.

Here’s what they had to say:

The Fate Of The European Union

“The U.K.’s vote to leave the EU brings uncertainty, but it does not bring the end of the EU; it could potentially mark a new beginning. ... The Brexit vote is a message of awakening and change. It is time for the progressive powers to make their vision convincing for a Europe of social cohesion, justice and solidarity.”

— Nikos Xydakis, alternate foreign minister for European affairs

“Although the result shocked me, I think we should remain calm. The EU doesn’t end today — we must take this opportunity to correct the mistakes it has made, which have turned many Europeans against it. Because of these mistakes, we often forget the good things that it still has to offer. The EU is our home. This is certainly not good news for Greece. Our effort to exit the crisis becomes more complicated because this decision disrupts our economy. Also, the EU’s reaction will be a much stricter implementation of rules.”

— Adonis Georgiadis, vice president of the New Democracy Party, Greek MP

“The biggest threat is the domino effect that similar referendums could have in the EU. Opinion polls are already showing that a large portion of people in Italy and France want similar referendums to take place in their countries. This could be the end of the eurozone, with disastrous consequences for our country.”

— Miranta Xafa, researcher for the Center for International Governance Innovation and vice president of the Action Party

“The growing discontent with the course of European integration was loudly manifested in the U.K., but in a xenophobic and nationalist way. For Greece, the Brexit will not have immediate economic and political consequences — we have to wait for the decisions of the European Central Bank too, of course. But it has reopened the discussion on what kind of European Union the Greek government wants.”

— Thodoris Paraskevopoulos, economist, member of the Syriza Party

Greek Economy, Exports and Tourism

“The initial prediction is that there is no doubt that Brexit will affect Greek tourism this year, to a certain extent, because we have 2.5 million English visitors, and they are our second-biggest market. It is certain that, with regard to the British market and considering the devaluation of the sterling pound, there is going to be some kind of reduction in demand from now on.”

— Andreas Andreadis, president of the Greek Tourism Confederation

“In trade, the devaluation of the pound will reduce the competitiveness of our exports to Britain (1.5 percent of the Greek GDP). Meanwhile, the dangers of inflation from a possible devaluation of the euro should not be ignored. Finally, it is important to take into account the high risk of Greek banks due to their exposure to the British financial system and also the large volume of cooperation between them. A significant increase in the cost of this cooperation is expected, which will add an additional burden to the already-exhausted Greek banking system.”

— Aristeidis Samitas, professor of finance at the University of the Aegean

“Regarding Greek businesses, we have a number of businesses which are small, innovative and dynamic and which invest in London and have some activity there as well. These businesses are going to suffer. As for bilateral trade, I think it’s not going to be significantly affected in the short term — perhaps the effects will mostly be psychological — but in reality, there are not going to be a lot of immediate changes, change will happen over time.”

— Kyriakos Loufakis, president of the Greek Business Association of Northern Greece

“For Greece, a possible renegotiation of the country’s debt relief is imminent, under a less strict program of fiscal adjustment, for fear of weakening the effectiveness of the applied economic policies. Still, this development increases borrowing costs for Greek bonds as a result of the turmoil in international markets. The impact is indirect, since Greece is not currently borrowing from the markets, but it delays the date at which it can access international markets even further.”

— Spyros Roukanas, professor of international political economy at the Department of International and European Studies, Piraeus University

Foreign Policy and Greek-Turkish Relations

“I think Britain’s departure from the EU will mean the end of any hopes Turkey might have had to join the EU. There could also be important developments in the Cyprus issue, because this conversation will reopen in Europe. Britain was always the strongest supporter of Turkey joining the EU because of the way it viewed the EU — a big market and nothing more. It was in Britain’s interests to integrate Turkey, even if this interest had diminished a little because of issues such as terrorism and security.”

— Michalis Tsinisizelis, professor at Athens University

This piece originally appeared on HuffPost Greece, and has been translated into English and adapted for a U.S. audience.