European Commission Approves State Support for Tourism Sector

The European Commission approved 86.6 million Euros to support the Cypriot tourism sector.

Package travel organisers, hotels and car rental companies affected by the coronavirus pandemic now have public guarantees for credit notes issued to consumers, organisers and other services.

The credit notes apply to cancelled services booked before October 31, 2020.

The money was approved under the serious disturbance rules for member states. This allows for EU funds to be used for the real economy.

Cyprus’ economy relies on tourism as it produces around 25 percent of GDP.

The European Commission prefers to reimburse travellers with coupons rather than cash, meaning the recipients may re-use them in Cyprus.

At the time of writing, our economy is the Titanic on the iceberg.

Tourism and hospitality are at a standstill after the glacier tore into them.

Meanwhile, much of the population is shivering with anxiety at home.

Companies and schools are limiting their operations in the sense that people are studying or working from home.

In addition to the tourism sector, the wider hospitality sector is on its knees. In the last nine months there were hundreds of event cancellations.

Musicians, florists, caterers, beverage suppliers, wedding gown sellers, party favour suppliers and other services lose untold amounts of income.

About the only businesses which appear to be benefiting for the moment are the grocery shops, home entertainment, takeaway/deliveries and pharmacies.

As I wrote in my March 2020 article Two Economic Scenarios for Cyprus Amid COVID-19 Coronavirus Pandemic I had hoped for the economy to be rescued in the following ways:

• Boosting emergency medical facilities.
• Slashing electricity prices or even providing free electricity, water and telecommunications during the emergency.
• Cutting VAT or suspending this and other taxes in a tax holiday.
• Deferring or suspending social insurance and defence contributions for several months for companies that are heavily impacted.
• Opening lines of bank credit at zero percent interest for a limited period – just to keep active and viable companies operating. Emergency funding for entrepreneurial companies, the future of economic growth.

Unfortunately, this hope is dimmer because the actions taken so far are half-measures.

Already, Moody’s talks about fiscal deterioration (government revenues are falling). Even with EU funding, the basic ability for the economy to work is hampered by lockdowns and cash flow shortages.

We may now need to prepare for the Titanic scenario and save what we can.