# **3.2 Economic impact and mitigation measures**

As expected, restrictions imposed by the government as well as the demand shock that affected most sectors resulted in a major economic slowdown with significant consequences for businesses and workers. GDP for the 1st quarter of 2020 decreased by 1.6% in comparison with the 4th quarter of 2019, while in comparison with the 1st quarter of 2019, the decline was 0.9%.<sup>6</sup> Various projections from national and international agencies estimate that GDP will shrink between 5.7% and 10% in 2020. A key factor will be declining exports, and especially tourism and shipping.<sup>7</sup> To keep the economy afloat during the pandemic, the Greek government introduced a range of measures to support affected businesses and their employees. The government mobilized an immediate aid package amounting to 6.8 billion euros (or 3.5% of GDP) for March and April and legislated an additional package of 24 billion euros in May in order to stimulate the restart of the economy in the aftermath of the crisis.

The first legislative act to support businesses (March 11) was intended to provide firms with liquidity through the extension of tax and social contribution compliance deadlines, discounts on certified tax liabilities in case they were paid in due time, and suspension of debt payments. About 800,000 firms that had been financially affected in terms of a decline in their turnover or had ceased operation by state order were eligible for these and other benefits described below, on the condition of no layoffs.<sup>8</sup> On March 18, the Ministries of Finance and Labor announced and then legislated a new package of measures. The key component was the provision of an 800-euro stipend (covering the period from March 15 to April 30, eventually extended through May) to workers whose contracts had been suspended because of the suspension of operations of their enterprise. In addition, for these workers, the government covered all social insurance contributions and all tax payments were suspended for a period of four months. The same measure was applied to freelancers, self-employed, and individual business owners with up to 20 employees.<sup>10</sup> Enterprises whose operations had been mandatorily suspended and affected employees were asked to pay just 60% of their rents for March to May.

Overall, by early May, approximately 1.2 million employees and 550,000 selfemployed and freelancers had benefited from this scheme. A one-off stipend of 600 euros in the form of a special training program was provided to specific professionals (economists/accountants, engineers, lawyers, doctors, teachers, and researchers) in April.<sup>9</sup> These occupations became eligible for the €800 financial support as of May. The budget allocation for the stipends for employees, freelancers/self-

> 6 <mark>See</mark> Table 2 <u>here.</u>

> 7 <mark>See the relevant Centre of Planning and Economic Research report</mark> <u><mark>here.</mark></u>

> 8 <mark>The list of eligible businesses was defined by virtue of Ministerial Decision by the Ministry of Finance (MoF), included business activities (sectors) per Code of Business Activity and was updated regularly during the health crisis. The most recent version of the list is provided on the MoF website.</mark>

> 9 The eligibility criteria for the freelancers, self-employed and individual business owners who were entitled to such financial support were explained in Ministerial Decision 39162 ΕΞ 2020/ GG B’ 1457/16.04.2020.

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