The “Greek Tragedy” playing out in the European Union's most troubled economy contains a bright spot for Israelis looking to get away on vacation.
As a result of Greece's problems – and the failure of the country to support the EU's demands for a strict budgetary regimen – the euro has been sinking all day Monday. By the close of trading Monday, the euro was at NIS 4.16 – a 13 year low, harking back to the beginning of 2002, when the pan-European currency came into being.
The low euro and high shekel makes European vacations significantly cheaper for Israelis than in many years – just in time for vacation season, with many Israelis booking plane trips, hotel stays, and tickets to sites and events on-line at historically unprecedented prices.
The loss of value in the euro is due to uncertainty as to what will happen next. Greece's refusal to accept a package of budget cuts, pension defunding, salary reductions, and general austerity has put European bankers in an awkward position – refusing to further fund Greece's huge deficit, but fearful to abandon the country to its whims, for fear of a “Grexit” – a withdrawal of Greece from the eurozone – would do to Europe's economy.
Speaking Sunday, outgoing National Economic Council (NEC) Chairman Prof. Eugene Kandel said that Israel has been much more successful than Greece in keeping its debt level down. In 2004, both countries had a similar debt-to-GDP ratio (how much of a country's GDP is needed to service debt) of about 94%. Since then, however, Greece's has shot up to 177.2%, while Israel's fell 68.8% in the same period.
What was Israel's secret? According to Kandel, the main reason for these changes is the difference in economic policies undertaken by the respective governments in the past 15 years. From 2002-2007, the Greek government chose to increase government expenditures and "benefits" to the public, such as pensions from the age of 57, etc., which could not be financed over the long-term. The Government of Israel chose a responsible policy of fiscal discipline and cutting government expenditures.
Kandel's comments were echoed by Prime Minister Binyamin Netanyahu. "GDP per capita in 2003 was higher in Greece than it was in Israel,” he said at the meeting. “We enacted a series of reforms to control expenditures and reforms to open markets to competition – and as a result of this, our GNP per capita has risen by 50% while Greece's, to my regret, has remained the same. We hope that Greece will find ways to rescue itself from this chronic crisis."