Operating on ‘accordion’ mode

Operating on ‘accordion’ mode

The so-called “accordion lockdown” may be testing the patience and stamina of entrepreneurs, who are forced to revise their plans and operations every now and then, but at least it secures some turnover, so it is better than a complete months-long lockdown, say economists who have observed its international application in the last few months.

It has been noted that the demand suppressed during the shutdown period then re-emerges substantially, covering a significant share of the losses incurred by the market. Economists note that this was proven in practice over the Christmas season, when the reopening of stores in most European markets allowed for the containment of the economic contraction.

“Everyone would prefer to exhaust the possibility of opening so they can make the most of the accumulated demand,” says National Bank of Greece chief economist Nikos Magginas, referring also to Portugal’s example. The race to find the golden ratio between opening and closing has come down to targeted openings, and must continue.

He adds that there is also a fiscal race under way, but estimates that the Greek state will be able to stand another year like 2020: It will be acceptable for the deficit to come to 6% of gross domestic product, against 8.5-9% in 2020, as other countries face the same problem too.

“The good news is that there is a section of the cyclical recovery that will emerge in the next year, provided the production structure has not been lost,” argues Eurobank chief economist Tasos Anastasatos. Another source of concern, he says, is the increasing tax obligations and nonperforming loans and their impact on banks.

His Alpha Bank peer, Panayotis Kapopoulos is also in favor of the accordion lockdown, as opposed to a full shutdown, stressing the significance of saving some turnover, which he describes as “a liquidity jab.”

Ilias Lekkos, Piraeus Bank’s chief economist, notes the difficulties in assessing the alternatives, but adds that a total lockdown to bring contagion down to zero would be hard to achieve as it would mean closing the borders.

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