Tourism Temporarily Eases Strain on EU Periphery
Video Transcript:
The tourism sector is providing good news to Spain and Greece, the two countries with the highest unemployment levels in the European Union. On Monday, the Spanish Ministry of Industry and Tourism announced that the arrival of foreign tourists in Spain grew by 5.3 percent in June compared to the same month last year. According to the Ministry, this was the best June in recorded history, after the arrival of tourists in May was also a record. Then on Tuesday, Greece’s national statistics office announced that tourist arrivals in the country grew by 4.6 percent in the first quarter of the year, surpassing one million visitors.
Tourism is an important economic activity in the eurozone periphery. The sector accounts for roughly 17 percent of gross domestic product in Greece and around 10 percent in Spain. This is well above the average of 4.2 percent for members of the Organization for Economic Cooperation and Development. The sector is particularly significant in times of crisis, because it provides an important source of employment, both in the formal and informal economies. This is especially true during the summer, when most tourism-related seasonal jobs are created.
Spain already had a good summer season in 2012, and it expects this season to be similarly good. The situation has been different in Greece, where the permanent threat of protests and strikes have negatively affected the sector since the beginning of the international financial crisis. But the country has more or less stabilized since last year’s general elections, and the 2013 season will probably be the best in a long time.
With the economic crisis, some hotels and restaurants have reduced their prices to attract foreigners. Last week, Greek Prime Minister Antonis Samaras announced that value-added tax in restaurants would be cut to 13 percent from 23 percent starting August 1, hoping to boost activity in the sector during the summer. Besides attracting visitors from Germany and the United Kingdom, two of the largest economies in the European Union, Spain and Greece also hope to attract more tourists from outside the European Union, especially Russia. This year, Spanish and Greek authorities also expect to benefit from political and social instability in competitor destinations in the Eastern Mediterranean, such as Turkey and Egypt.
However, not all news are positive in these countries. Since the beginning of the crisis, domestic tourism has dropped considerably in Spain and Greece. With unemployment rates above 26 percent, local tourism has been severely affected by the crisis, and in some cases the arrival of foreigners hardly compensates for the loss of local tourists.
It’s also worth keeping in mind that the tourism industry is highly seasonal, which means that a good portion of the jobs created during the summer will be temporary. As a result, the good tourism seasons in Spain and Greece probably will offer only a temporary relief to the crisis in both countries. But despite these caveats, tourism is one of the few sectors that will bring good news to the economies of Spain and Greece this year.
