ANALYSIS

Lost in a nirvana of expectations

lost-in-a-nirvana-of-expectations

One can pretend to live in the best of all possible worlds, the best days. But, complacency won’t work out well. One can, for example, be content in feeling that Greece’s economic problems will soon be resolved, because in the next few years about 110 billion euros will pour into the economy from the European Union’s post-pandemic recovery fund, the National Strategic Reference Framework (NSRF), the Common Agricultural Policy and the relevant private participation.

However, no serious person believes that with the problems facing the public administration and the well-known state of our justice system (with the possible exception of the Court of Auditors) Greece will be able to absorb such a large amount of money in such a short time – at least not in a productive way. But those in charge don’t seem to be concerned.

It is also very doubtful whether Greek businesses can absorb so much money in such a short time. The projects included in the EU recovery fund and NSRF largely overlap (digital modernization, green growth). Getting started will be relatively easy, since the investment plans currently included in the recovery plan submitted by Greece have already matured and were just waiting for cheap financing to be implemented. Essentially, they are switching from the NSRF to the EU recovery plan.

As time goes by, a cloud of doubt is appearing over the good scenario, which would be for Greece to use these European funds to change the country’s economic trajectory.

Many foreign analysts are already talking about (early) reform fatigue. The illusions that are being rekindled by the availability of substantial funds to support the economy in the current crisis – in stark contrast with their scarcity during the debt crisis of 2009-10, which required savage spending cuts – breed a sluggishness that could well lead to a repetition of the time-honored conservative tactic, “Leave it for later.” Deep reforms are either delayed or suspended indefinitely. And any reforms being implemented are being done slowly, they are dragging, as if time is on Greece’s side, or as if the aim is to remain in a state of nirvana until the next election.

The bad scenario is becoming more of a possibility. That is, that we will experience two or three years of economic growth without any reforms – neither in the economic model nor in the rules.

The rapid pace at which the country is recouping its GDP losses, not through investments, but through private and state consumption, hides the fact that at the end of the year – at best – we will have reached the same GDP as 2018, with all the existing structural weaknesses and a widening of social inequalities.

The euphoria that there is money available hides the great division in the Greek economy between its dynamic part, a few strong, modern companies that are moving forward, and an archipelago of about 200,000 very small businesses that are on the brink of bankruptcy.

The ease of borrowing, thanks to older debt arrangements and the monetary policies followed by European Central Bank President Christine Lagarde, hides the need to get our finances in order, which would provide us with the credibility required to seriously participate in the debate about the EU’s new fiscal policy starting in 2023. We need some kind of consensus and a proper plan. There is neither.