The economy in the (pre-election) year of 2022


How will things go for the Greek economy in 2022? The uncertainties plaguing the entire world are enormous. One is the pandemic – and the Greek 2022 budget was drawn up on the assumption that the health crisis would ease. Another is inflation (whether transitory or not) and energy prices especially, as the US bridge breaking Russia’s exclusion of Europe from natural gas supplies is a quick but not permanent fix.

Moreover, given that an unprecedented 10-year economic slump has passed and it is still a relatively cheap country; that the value of land is relatively cheap; that there are trillions of dollars in the world looking for investments and that state aid to the Greek economy was proportionally the largest in Europe, Greece’s gross domestic product growth ought to be brisker. The rate of growth, meanwhile, is not as important as its quality: It is showing all the historical distortions reflected in low productivity, a large external deficit and high unemployment.

It is not enough to throw money into the market to correct these issues. Clear priorities and reforms at every level are needed. These do not exist and that is why, as Greek central banker Yannis Stournaras clearly explained last week, the strategic goal, which is Greece’s credit rating upgrade by early 2023, is at risk. The reforms recommended by Cypriot Nobel Laureate Sir Christopher Pissarides and economist Nikos Vettas were not implemented in the first two years of the administration, when Prime Minister Kyriakos Mitsotakis still had the support of a section of the political center against right-wing conservatism. Is there any chance they will be implemented now, in the middle of what is a prolonged pre-election period?

Snap polls are considered a given, but no one can say when they’ll take place. Concern about the result under a system of proportional representation, the impressive rise of center-left Movement for Change (KINAL) and the new rules for the expected runoff which require a very high percentage for an absolute majority, push back their possibility. Main opposition leader Alexis Tsipras’ call for early elections contributes to the same, as no prime minister wants to appear to have been dragged into elections by the opposition. If, however, the exact timing remains unknown, the consequences could be very negative now: There are too many indications that reforms have stalled, while populism makes its presence more pronounced.

After a 10-year debt crisis and a two-year Covid-19 crisis, society’s resilience is fading and a lot of anger has accumulated. Greek entrepreneurship is not at its best. A dynamic part is moving forward, but a very large part is lagging behind or collapsing, while competing players from richer countries are coming in with strong support (that was targeted, unlike in our country) from state capital. There are also many, many problems that remain unresolved, from non-performing loans to the slow justice system. If things are left as is, after two or three years of relative economic euphoria there is a real possibility of returning to weak growth rates of around 1.5% – which would not allow debt servicing.