Under the cushion

Under the cushion

European Central Bank President Christine Lagarde said she won’t allow games to be played with Greek bonds and announced measures that will ensure Greece keeps its borrowing costs low even after the end of the pandemic emergency purchase program (PEPP) in March 2022. A waiver had been granted to include Greek government securities even though they are a couple of notches below investment grade.

From now on, two things will happen: The ECB will reinvest the maturing principal payments of Greek bonds in Greek bonds and it can also buy Greek bonds with some of the money from other member-states’ maturing private and public sector securities. This reinvestment will last “until at least the end of 2023,” the ECB says. If necessary, the ECB may relaunch PEPP.

Essentially, the ECB is providing a cushion for Greece until it regains the creditworthiness that will allow it to participate in the regular securities purchase program, something estimated to happen by the end of 2022.

The question is whether we will take advantage of the cushion to put a spring into our step or whether we will lie down contentedly on it. Our political system makes the second option more likely.

An indication is its obvious predisposition to put a favorable spin on difficult situations and hide thorny problems under the carpet – or under the cushion, if you like. It happens with the economy and something similar happens where the pandemic is concerned: At times, we are supposed to be walking the last mile, at others, we are supposed to have a perfect ICU system, and the permanent refrain is that there is never, ever a need for extra protection measures – even when our macabre level of fatalities nears European highs, in respect to the total population. And, suddenly, a study, like that by Professors Sotiris Tsiodras and Theodoros Lytras, drops like a bomb and the scene changes dramatically: Everyone, including the highest government officials, simultaneously learns that we do not have the best ICUs in the best National Health System of the best prepared country in Europe…

Positive spins abound also at the economic policy level. It is said that we have solved the problem of nonperforming loans when what has actually happened is that the banks have offloaded them from their accounts into the care of funds, where they lie in stagnant puddles. We say we are enjoying explosive growth, when what’s really happening is a fast recovery from heavy GDP losses but with all the structural weaknesses left intact, thus the fast growth of a balance of payments “black hole” and the persistence of unemployment at dramatic levels. It is said that we will rapidly implement all the projects funded by the EU’s Recovery and Resilience Fund and the fact that we have transferred all projects funded by European Structural Funds to the recovery program is not mentioned, hence the rising concerns about absorbing Structural Fund resources in the coming years.

To solve a problem, one must first understand it. We are not doing this; instead of looking at the mountain of debt, we are satisfied that we can borrow more, albeit at lower rates, thanks to the ECB. Instead of getting anxious about economic growth partly based on consumption (that will take a hit in the coming inflation wave, which we also pretend we can’t see…), we take a perverse national pride in it. Instead of worrying about the climate crisis, we are OK because the investments supported by the Recovery Fund “will not seriously harm the environment” and we face the extreme weather phenomena and the floods like we did the wildfires, by evacuating areas. We displace inhabitants as a precaution, but the inadequate infrastructure remains and awaits them – like the wall that looms ahead of us, ready to absorb our slamming into it. 

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