So, for the time being, it looks as though the Greeks have probably avoided Grexit. The banks are open again, card payment systems continue to work and a measure of stability has been re-established for holidaymakers and locals. And there are plenty of last-minute deals for anyone looking for some summer sun.
But what about the longer term? I’m certainly not a macro economist, but it seems to me that there are some significant downsides to the compromises keeping Greece in the euro. The Greek economy depends more than anything on the income generated by tourism and it is vital that it remains competitive – we holidaymakers are a fickle bunch, heavily influenced by price, and we expect Greece to be good value. Ironically, staying in the eurozone is likely to keep prices higher for two reasons.
First, Greece remains tied to a strong currency, which, while it keeps prices down for fuel and other imported goods, pushes up other key costs for overseas visitors. Arch-rival Turkey’s lira has fallen consistently against the pound – even allowing for higher local inflation. It is currently worth barely half what it was in 2008. The euro has remained much stronger. Second, the proposed new rates of VAT, imposed as part of the terms of a new bail-out agreement, are likely to push up local prices for tourists.
Much remains uncertain, but these are the key questions that will affect tourism in Greece:
How do current costs compare with other destinations?
The Post Office publishes regular surveys of costs relevant to holidaymakers across many destinations. The latest of these puts Crete in a slightly more expensive price bracket than the Costa del Sol, but a little cheaper than Marmaris in Turkey; Corfu on the other hand comes out significantly more expensive. But, overall, most costs on the islands are still much lower than in the UK. Our expert Marc Dubin, who lives on Kos, says you can currently get a meal out for two, with a couple of beers, for €38 (£27).
Will new tax rates affect prices this summer?
On Monday, VAT on taxis, buses, ferry tickets and restaurants rose from 13 per cent to 23 per cent – but these rises might not be passed on in their entirety. Sunvil, the specialist tour operator, says that most tavernas are absorbing the increases, and where they aren’t, an average meal seems to be going up by a couple of euros.
What about holiday prices next year?
The biggest impact is likely to come next summer. VAT on accommodation rises from 6.5 to 13 per cent on October 31, which is also when a special 30 per cent VAT discount will be removed from popular holiday islands. This is a huge jump. It would be surprising if this did not affect package holiday prices.
Good news on the euro: while Greece may not have a currency of its own to devalue, the ructions over Grexit have at least depressed the value of the euro against the pound. Even if this turns out to be temporary, British holidaymakers all over the eurozone are set to enjoy the most favourable summer exchange rate since 2007. I was in France last week and a modest meal for two cost me €70. Two years ago, I would have had to reckon that at about £61. But last week’s bill has just appeared on my credit card statement – it cost £48.
source: Telegraph, by By Nick Trend