Even as the Greek government negotiates over its bailout program, efforts by the EU to stem the flow of refugees look set to dramatically increase the financial cost for Greece. Pavlos Zafiropoulos reports from Athens. 


In mid-December, the governor of the Bank of Greece, Yiannis Stournaras, travelled to Frankfurt to meet with the board of the European Central Bank. The details of what was discussed in that meeting were kept confidential, but one item was leaked to the press: according to Stournaras the refugee crisis was developing into a significant ‘downside risk factor’ for the long-hoped-for Greek economic recovery. According to government projections, Stournaras told the central bankers, handling the refugee crisis would cost the Greek state roughly 600 million euros ($677 million) in 2016 alone, a sum equivalent to 0.3 percent of the country’s GDP.

Less than two months after that meeting, those projections now seem highly optimistic.

The 600-million euro figure was the product of detailed and ongoing research spearheaded by the Finance Ministry’s Council of Economic Advisers in an attempt to establish the true cost of the refugee crisis to the Greek state.

Specifically, it covers the projected cost of search and rescue operations, migrant transfers from the islands, asylum and relocation processes, deportations, and perhaps most importantly, the creation and operation of the so-called hot spots and open reception facilities for migrants and refugees.
policeman beating protester copyright: picture alliance/dpa/Str

So-called hot spot centers for refugees are due to open next week

But the problem is that the 600-million euro figure only takes into account the cost of creating and operating facilities to accommodate roughly 12,500 migrants and refugees at any one time, an official with the Council of Economic Advisers told DW. With Europe desperately seeking to stem the flow of refugees northwards, Greece has since committed to creating places to accommodate 30,000 refugees and migrants, with an additional 20,000 places to be created in Greece by the UNHCR.

“The 600-million euro figure will certainly be revised upwards,” the official told DW. “I think the real cost will be closer to 1 billion euros.”
 Who will pay?

With Greece’s public spending increasingly pared to the bone and already high levels of taxation, that raises the question as to where the additional funds to deal with the refugee crisis will come from.

“Given Greece’s economic circumstances, the cost of dealing with the refugee crisis is not negligible at all,” Nick Malkoutzis, editor of the political and economic analysis website Macropolis, told DW. “The 600 million euros the Bank of Greece mentions, for instance, is equivalent to a third of the savings Greece has to make from pension spending this year.”

Existing EU mechanisms will provide Greece with close to 510 million euros to deal with the refugee crisis, but that is over the period 2014-2020. Only about 150 million euros of those funds are currently expected to be disbursed to the country in 2016 at best.

“Quite simply it will be close to impossible for Greece to do all of this without additional funds,” the official with the Council of Economic Advisers told DW, referring to the measures to handle the refugee crisis. “And funds that are released soon and without many layers of bureaucracy either from the Greek or European side, because the cash simply isn’t there.”

Even the European Commission appears conflicted over what it wants. In its latest Progress Report on Greece’s handling of the refugee crisis, the Commission recommends the hiring of additional personnel by the Greek Asylum Service. Yet Greece’s Memorandum Agreement (to which the Commission is a party) effectively discourages the hiring of new public servants.

Indeed, the strict requirements over new hires can even perversely lead to even higher costs because reassigning existing public employees to meet needs in remote areas can be more expensive in the long term than simply hiring new personnel, according to the Finance Ministry official.
 Migrant economics

That said, at the national level, the refugee crisis is expected to have a limited effect on the Greek economy and particularly the key sector of tourism, given that relatively few tourist destinations are affected. Recent research released by the Greek Tourism Confederation shows that Greece continues to be considered one of the safest destinations in the Mediterranean, especially compared with traditional competitors such as Turkey and Egypt. “The demand for rooms in safe destinations in the Mediterranean is outpacing supply,” Andreas Andreadis the President of the Greek Tourism Confederation told DW, “so I believe that [tourism in Greece] will be at the same level or slightly up from that in 2015.”

However, the picture becomes more complex on the islands of the Eastern Aegean that are at the forefront of the crisis. While many fear that tourist arrivals will be severely affected over the coming summer, that loss in revenue has been at least somewhat compensated for by the economic activity the refugee crisis itself has brought. On the island of Lesbos, for example, many hotels that would have shut for the winter have remained open to cater for visiting NGO workers, journalists and the refugees themselves. The roughly 500,000 refugees and migrants who have passed through the island have also spent untold amounts on basic goods and services in local shops that have proven quick to adapt to the trade.

“The key issue on these islands will be if they are handling [the refugees] in an organized and humane way,” Andreadis said. “Lesbos is a good example of an island that is handling the situation smartly. Other islands like Kos are not handling it so smartly.” On Kos there have been recent violent protests at the creation of a refugee reception center on the island.
 In the shadow of the bailout

While in the past other European governments have been quick to insist there should be no linkage between Greece’s bailout program and the refugee crisis, it is one that is increasingly difficult to avoid, if only due to an accident of timing.

“I think it is certainly possible that we will see Greeks grow fed up with the barrage of criticism from abroad, especially when it is widely acknowledged that other EU countries are doing very little to address the problem,” Malkoutzis said with regards to a potential resurgence of euroscepticism in the country. “We should not underestimate the psychological impact of Greeks feeling that they are being unfairly blamed for yet another European crisis but also being physically penned in by their neighbors, who are building border fences and stepping up controls at their frontiers.”

Just this week far-right groups and the country’s farmers competed for attention on news bulletins, the former protesting the opening of refugee reception centers and the latter the government’s planned fiscal reforms. The government, with its slender parliamentary majority, is already facing a major test to pass the reforms necessary for a successful bailout review. If at the same time the refugee crisis threatens to open up yet another black hole in the national budget, it will be another nail in the perceived coffin of European solidarity.