Russia-Ukraine conflict big blow to Greek economy, analysts say

ATHENS, March 15 (Xinhua) -- The ongoing Russia-Ukraine conflict has dealt a big blow to the Greek economy, with the magnitude of impact hinging on its duration, analysts here have said, calling for concerted efforts at the European level to address the challenges in the short and long term.

"It is a big shock, not only for Greece, but for the global economy, especially for European economies ... European GDP will be lower after this crisis. And of course, everything depends on the length of the crisis," Panagiotis Liargovas, chairman of the board of directors and scientific director of the Center of Planning and Economic Research, a leading research institute in Greece, told Xinhua in a recent interview.

Though the proportion of the Russian economy in the global economy is small, most European countries have trade relations with Russia and are already experiencing the consequences, he noted.

"The situation is difficult, there are a lot of uncertainties, and we are faced with greater difficulties that lay ahead," Greek Finance Minister Christos Staikouras told an online conference organized by the Athens Chamber of Tradesmen last week.

"There will be significant financial losses that we will try to contain," he said, as concerns are raised over the surging energy costs, rising inflation and repercussions on trade and tourism.

The tourism sector, accounting for about a fifth of Greece's GDP, is seen as a vital pillar for its economy.

Though Russian and Ukrainian tourists only represent a small share of the Greek tourism industry, the crisis may impact the vacation plans of other travelers, which is worrisome, Liargovas noted.

Each 10 percent rise in energy prices will push inflation up 0.2 points, Staikouras told the Greek national news agency AMNA.

Well before the Ukraine crisis, energy costs in Europe had started increasing and pushed up inflation. Greece's annual inflation rate jumped to 7.2 percent in February, hitting a record high since 1997.

The country's Hellenic Statistical Authority attributed the surging inflation to the recent hike in energy prices, including those of natural gas, up 78.5 percent in February, electricity, up 71.4 percent, and heating oil, up 41.5 percent.

Liargovas and other experts estimated that Greece's inflation rates might reach 8 percent in the coming months.

The current crisis may offer an opportunity to speed up the energy transition toward renewable energy sources, Liargovas said.

The size of the energy problem determines that "no country by itself can deal with this problem. We need a European reply, a European tool to combat this," he added.

Meanwhile, uncertainties also sent borrowing costs higher, especially for Greece, which is yet to regain investment grade, and no country can cope with such challenges on its own, Staikouras said.

"All sectors will be affected," as well as the supply chains, Liargovas stressed, noting that both Russia and Ukraine are important sources of Greece's imports of cereals and minerals.

Prices of the latest deliveries of soft grains in early March were up by 60 percent, Michalis Mousios, president of the Hellenic Bakers' Federation, told local MEGA television, stressing that rising prices of basic products such as bread would be inevitable.