The goal is to restrict the COVID-19 contagion as much as possible, affording time for the country’s health system to prepare for the inevitable onslaught. The unintended but unavoidable victim in all this, however, is the country’s economy which had just begun recovering from a 10-year old crisis. Today, it finds itself poised to re-enter intensive care.
The government won permission from the EU to adopt a €10bn package of measures designed to limit the damage done to businesses and to protect jobs and employment figures. “The state budget is being revised. So, in addition to the €3.8bn in measures already allocated, another €3bn will be allocated to support the economy from the state budget – and at least the same amount through the restructuring of ESPA [National Strategic Reference Framework],”Prime Minister Kiriakos Mitsotakis said in a recent televised address. He added that this did not include the provision of additional liquidity to businesses from the available financial tools.
For the month of March, the government has announced a number of relief measures, which apply to 600,000 private corporations, employing 1.2 million people and to 550,000 self-employed professionals who will also be eligible. In addition to tax breaks and relief from social insurance contributions, this package is also expected to include more European Union structural funding.
A separate package is also being devised to prop up the country’s crucial tourism sector with a reduction of value added tax rates and other charges.
Among the main measures that are being implemented are the suspension of payments of taxes in sectors which are severely affected by the spread of coronavirus; €800 in compensation to be paid in April to employees whose contracts are suspended; a 4-month deferment of tax liabilities beginning March for self-employed and sole proprietors in impacted sectors.
Companies that have been forced to shut by government decree (like stores and restaurants) are only expected to pay 60 percent of their rent for the months of March and April. Landlords will be compensated by receiving tax holidays for the next four months. Employees affected by these business closures will also be allowed to pay just 60 percent of their rent and again their landlords will be offered a 4-month tax holiday. Employees who receive the €800 contribution from the state will also be eligible to defer debt payments to banks for three months.
In another important move, European Union finance ministers formally endorsed the suspension of EU limits on government borrowing, giving countries a free hand to fight the disastrous economic effects of the coronavirus epidemic. It means that member states are no longer governed by the rules of the Stability Pact. The activation of the “general escape clause”is now shifting the challenge of supporting economy from the realm of fiscal policy to supporting liquidity.
The economic support measures will continue next month, raising the cost for the state. It is believed that they will include an expanded range of interventions involving even more corporations hurt by the new crisis. The Finance Ministry estimates they will expand the range of companies receiving pandemic support measures from around 45 percent to between 60-70 percent.
