Will the Drop in US Dollar Affect Tourism in Greece?

Will the Drop in US Dollar Affect Tourism in Greece?

Currency fluctuations cloud the horizon of the Greek tourist industry

By Christos Papoutsy

Consumers at Outdoor Market in Thessaloniki Argue About Prices (ANA)

A soaring Euro, a dropping dollar, and the switch from the drachma to the Euro, combined with inflation, high unemployment, and bad weather, could create a dramatic decrease in tourists visiting Greece and other EU member countries for the balance of 2003 and beyond. Two principle culprits threatening the tourist business in Greece are the switch from the drachma to the Euro on January 2002, and the recent drop in the US dollar.

Since the Euro currency was launched in Greece, inflation has made a major, unexpected impact on most products purchased in Greece with the Euro. Spiraling prices have made life more expensive for the average citizen in Greece. Workers and retirees have been struggling to make ends meet on wages or pensions, unable to keep pace with inflation, forced to spend more every week for the same necessities.

Tourists are also facing these higher prices for products and services--with Euro-converted US dollars. Concurrent with higher prices for necessities in Greece, the Euro has increased in value over the dollar by approximately 20%, making each dollar that US tourists convert to Euros worth about 80 cents. Thus, the US tourists visiting Greece are slammed twice--by significantly higher prices for almost all products and services and by a US dollar worth about 80 cents.

The chart on the next page clearly illustrates the significant effect of the conversion from the drachma to the Euro and the drop in the value of the US dollar to the Euro.

Next Page: Spiraling Prices

(Posting Date 23 June 2003)