Saturday April 18, 2015 Search
Weather | Athens
14o C
09o C
News
Business
Comment
Life
Sports
Community
Survival Guide
Greek Edition
Perceptions and praying for our peers

 Biggest threats to Greece’s recovery are how others view the country and other eurozone states’ performance

By Dimitris Kontogiannis

The performance of the eurozone’s other economies over the next few quarters will be much more important to Greece’s than the seemingly meager impact from the geopolitical crisis in Ukraine, Russia and elsewhere. However, the perception regarding Greece’s commitment to streamlining its economy amid increased political uncertainty ahead of the vote for the new president of the republic in Parliament will be even more important.

The recent embargo on Greek and other European Union exports to Russia and the estimated impact on the local tourist industry from the drop in the number of Russian tourists – the fastest-growing market segment over the last few years – will have a very limited effect on the economy, assuming this adverse trend doesn’t extend well into 2015, according to analysts. It is definitely not good news for the seemingly fragile recovery under way but does not pose an insurmountable obstacle at this point.

On the other hand, the stagnation of the eurozone economy, the biggest export market for Greek goods and services, could have a bigger and faster impact if it continues. Readers are reminded that the eurozone economy’s real gross domestic product was flat quarter-on-quarter during the April-June period, with some large economies either stagnating or shrinking, according to preliminary data. The weak economic activity has fueled concerns among analysts and policymakers, who are calling for a less restrictive fiscal policy and a more accommodative monetary policy.

European Central Bank President Mario Draghi told other central bankers at their annual meeting at Jackson Hole in Wyoming that the ECB stood ready to take additional measures if those announced in June failed to anchor inflationary expectations. He also appeared to be in favor of more flexibility in implementing the fiscal compact rules, which brings him closer to his compatriot, Prime Minister Matteo Renzi. It is noted the Italian economy, the third largest in the eurozone, shrank in the second quarter and is now about 9 percent lower than when the crisis started. The Italian real GDP is at the 2000 level according to analysts. Harvard Kennedy School Professor Jeffrey Frankel has pointed out Italy would have been in a recession for the last six-and-a-half years if the term was defined according to US standards.

It is obvious sluggish economic growth in the eurozone does not bode well for the fragile Greek recovery, which seems to be under way, since demand for export goods and tourist services will likely be weak. It is noted the flash estimate showed that real GDP shrank by 0.2 percent year-on-year in the second quarter on its way to a positive reading in the third quarter boosted by a good tourist season and the apparent stabilization in private consumption spending. More importantly, unofficial estimates point to a positive change, of around 1 percent, in seasonally adjusted GDP data compared to the first quarter.

It is not a coincidence that new hirings exceeded layoffs and labor contract expiries by about 190,000 in the private sector during the January-July period, according to official Labor Ministry figures. This is the highest number since at least 2001 for the same time span. Hirings surpassed layoffs by about 92,000 in the same seven-month period in 2013. It is definitely a good sign for the economy but one has to take into account the fact that full-time jobs represented 53 percent of total hirings. Moreover, the new jobs must pay low wages given the profile of the new openings – i.e. waitresses. Some jobs must be seasonal – linked to the tourism period – as well.

Although the disappointing output data from other eurozone economies pose a risk to Greece, especially if they last for many more months, the biggest challenge to the country will likely come from another source – the perception of markets and policymakers in the EU and elsewhere regarding the country’s commitment to restructuring its economy and sticking to fiscal discipline. This is more so as the time for the vote in Parliament for the new president of the republic approaches. It is scheduled for February-March 2015 but it could take place as early as this fall, analysts say.

At this point though it looks as if there is a greater chance the vote will take place next year. Readers are reminded that any candidate will need 180 votes in the 300-seat Parliament to be elected and failure to do so will result in national elections. This is bound to increase political uncertainty in the months ahead at a time when the troika’s review will be expected, not to forget talks on debt relief measures.

If Greece keeps on meeting or surpassing its fiscal targets, advances the privatization agenda and delivers on a few structural reforms, market perceptions will not be an obstacle to economic recovery despite any increased political uncertainty. The state and companies may be able to tap the markets again and the core banks to raise enough capital from private sources to cover any capital shortfalls identified by the ECB’s asset quality review and stress tests. In fact the economy may even enter a virtuous cycle. The opposite will happen if it fails to meet the minimum targets.

The power of perception at a time of an anticipated rise in political uncertainty and the economic performance of the eurozone trading partners represent the real threats to the story of the Greek economic recovery. If the country manages to positively influence these perceptions and economic activity in the eurozone picks up, it would have made a big step in the right direction, irrespective of geopolitical risks.

ekathimerini.com , Saturday August 23, 2014 (18:30)  
ECB examines possible Greek IOU currency in case of default, sources say
New bank programs to contain bad loans
Industrialists warn on mine intransigence
Early Easter boosts job hirings
Krugman advises against ‘nightmare’ euro exit
Economist and New York Times columnist Paul Krugman spoke at the Athens Concert Hall on Friday. Although Krugman was critical of the way that the eurozone has handled Greece’s crisis, he adv...
Brussels Group due to meet in wake of Obama’s call for Greek reforms
Greece and its lenders are due to get back down to business on Saturday with a meeting of the Brussels Group that Athens hopes will result in an interim agreement by the end of the month at ...
Inside News
BASKETBALL
Triumph for Olympiakos at Barcelona
Olympiakos produced its best away performance so far this season to defeat host Barcelona 76-63 on Friday and snatch the home advantage in the Euroleague play-offs. The Reds have now tied th...
BASKETBALL
Another heavy loss for improved Panathinaikos in Moscow
Panathinaikos raised its performance since Tuesday but still suffered a 20-point loss at CSKA Moscow on Thursday to find itself trailing 2-0 after Game 2 of the Euroleague play-offs. Having ...
Inside Sports
COMMENTARY
The Armenian genocide and Hagia Sophia
Pope Francis’s declaration that the slaughter of Armenians by Ottoman forces 100 years ago was “the first genocide of the 20th century” will hasten the conversion of the Hagia Sophia museum ...
EDITORIAL
Crime against education
The government’s plans for Greek state universities are nothing short of criminal. It took decades for us to mature enough as a society and for Parliament to accept, with an unprecedented ma...
Inside Comment
SPONSORED LINK: FinanzNachrichten.de
SPONSORED LINK: BestPrice.gr
 RECENT NEWS
1. Triumph for Olympiakos at Barcelona
2. Krugman advises against ‘nightmare’ euro exit
3. Brussels Group due to meet in wake of Obama’s call for Greek reforms
4. Crackdown on uni sit-in deepens rifts in SYRIZA
5. Greece, Cyprus hope for progress in peace talks
6. Komotini mosque damaged by fire, arson suspected
more news
Today
This Week
1. Quarantine for Greek bank subsidiaries in neighboring countries
2. Putting off payments led to Q1 budget primary surplus
3. Obama calls for flexibility in Greek reform talks in brief exchange with Varoufakis
4. Greek finance minister says cannot sign existing loan deal
5. Greece enters twilight zone as visions of euro exit take shape
6. Fourteen face charges after police enter Athens University grounds, ending sit-in
Today
This Week
1. Quarantine for Greek bank subsidiaries in neighboring countries
2. Greece and lenders head back to technical talks
3. Contraband is big business in Greece
4. FYROM push expected at EU meeting
5. Islands of eastern Aegean struggle as migrant influx triples
6. Greek finance ministry hits back at German newspaper report
   Find us ...
  ... on
Twitter
     ... on Facebook   
About us  |  Subscriptions  |  Advertising  |  Contact us  |  Athens Plus  |  RSS  |   
Copyright © 2015, H KAΘHMEPINH All Rights Reserved.