The Greek economy faces multiple threats. The total cost of support measures, which was originally estimated at 7.5 billion euros this year, has already climbed to €13 billion (it could prove more costly than a New Zealand type of Covid-19 response which would potentially have saved more lives) and it continues to grow as the aid is being handed out almost indiscriminately, even to zombie companies.
Meanwhile, amid the general turmoil, many key reforms have been put on the back burner, including reforms designed to streamline the civil service, the justice system and, more urgently, the public health system.
A third problem is that the central administration is seriously underperforming compared to the pre-Covid era (when it was not exactly quick-paced). Some services are barely functioning at all.
Furthermore, there is no plan to deal with the consequences stemming from the collapse of a big chunk of the economy, nor a plan to help small and medium-sized businesses the day after with European funds.
The biggest threat, however, is that the country – particularly the urban centers which have been the hardest-hit from the economic and health crisis – is a tinderbox. Society, which has already put up with 10 years of financial crisis, is exhausted. People are getting poorer (GDP shrunk by €168.5 billion last year), unemployment is rising and entire generations of Greeks feel they’ve reached a dead end.
Furthermore, there is deep concern over tensions on the country’s eastern border and developments in the Aegean and the wider region. There is fatigue due to the constant seesawing between complacency and the drama of death, between expectation and disappointment inflicted by a fresh surge of the pandemic.
The economy is fragile, and so is the trust of foreign markets. Over the past decade, thanks to the hard work and great sacrifices – mostly of low income groups and at the expense of the younger generations – the Greek economy managed to heal many of of the wounds caused by the derailment of 2007-09, cut back spending, boost the production of internationally tradable goods and services, improve its competitiveness and begin to create new jobs.
However, the balance remains very delicate. Greece is lucky to have been included in the European Central Bank’s Pandemic Emergency Purchase Program. It can borrow at low cost (despite its huge debt) and at the same time there is the possibility of fiscal measures to support the economy. We are leaning on Lagarde, not standing on our own feet.
If we want to keep the peace, we need some sort of national understanding and less partisan polarization. Here’s a challenge. The democratic political system is called upon to confirm its purpose and effectiveness.