Goals of social and economic resilience

Goals of social and economic resilience

With the pandemic still not having completed its cycle, the energy crisis and the jump in prices have added to a number of challenges we have to face. The inability to adapt to the consecutive crises intensifies the feeling of insecurity, making it clear that a change of course is needed.

In 2020-21, the total value of financial interventions implemented by the government to address the pandemic amounted to 43.3 billion euros, making it the fourth largest fiscal expansion in the world as a percentage of GDP. However, the effectiveness of the measures, due to their horizontal nature, was not the same. We spent about 25% of our national income, but we have a worse quality GDP. State aid does not automatically constitute new wealth – instead, it is additional debt.

The spectacular increase in bank deposits did not result from economic growth, as the government triumphantly claims, creating illusions, but is mainly due to the deferred consumption of households due to the lockdown, and the liquidity channeled by the state.

As a result, Greece’s debt remains the highest in the eurozone, the trade deficit soared and the economy’s competitiveness remains low. This policy also has side effects. As we face the energy crisis, the government suddenly remembered that there is no magic money tree, something it seems to have been unaware of previously, so it has run out of aid, leaving many of the most vulnerable households mostly unprotected.

Unfortunately, even now, after so many years of crises, the absence of long-term policies and fragmentation prevail. That is why we need to make the most of the resources at our disposal to shield our economy by setting resilience goals.

The EU Recovery and Resilience Facility is a powerful tool, with resources of 32 billion euros for Greece, which should be utilized effectively, in a targeted and meritocratic way, away from the bad practices of the past, based on a comprehensive plan for a sustainable development model. Protecting our economy from energy crises and our smooth decoupling from fossil fuels is a priority.

The country’s electricity grid is suffering. In many areas it has reached the limits of its capacity, preventing the entry of new energy communities producing renewable energy sources (RES). Its interconnection remains at a very low level, both in terms of the Aegean islands and cross-border. All of the above have financial consequences, which citizens see in their electricity bills and the charges for utilities.

Nevertheless, the network interventions included in Greece’s National Recovery and Resilience Plan are limited in relation to the existing needs. Only 195 million euros is earmarked for interconnecting the islands, €100 million for enhancing resilience, and another €12 million to increase its capacity by 800 MW. There is no provision for extending interconnection with the rest of Europe, thus prolonging our energy isolation. However, our country must proceed immediately with the necessary investments, so that we are ready to take advantage of the benefits of the European Energy Union.

Phasing out lignite, which is implemented without a plan to address the social consequences in Western Macedonia and the area of Megalopolis, does not also mean decarbonization. We are the only EU member-state that has increased its dependence on gas during the energy crisis. On the contrary, Germany, for example, which since 2011 has been implementing a plan to withdraw its nuclear power plants, has focused on RES, with the participation of natural gas remaining stable.

Apart from investments, however, we must also look at market regulation issues, which have no budgetary costs but do have tangible benefits for citizens. Greece is consistently among the most expensive countries in Europe in the wholesale price of electricity, due to oligopolistic distortions.

The network interventions included in Greece’s National Recovery and Resilience Plan are limited in relation to the existing needs 

In most EU countries, most of the energy consumed is sold on the basis of long-term contracts, offering price stability. In Greece this percentage is zero, with 100% of the energy being sold daily on the stock market while in Germany and France the corresponding percentage is 29% and in Italy only 11%. At the same time, the costs of the crisis cannot be borne only by consumers and the state. It should also be distributed among large producers as well. It is necessary too for Greece’s power regulator RAE to include a ceiling in the adjustment clause, so that the consumer knows the maximum and the minimum estimated amount that he is required to pay.

In addition, it is socially necessary to increase the resilience of the welfare state, as the pandemic has shown the limits of public healthcare services. In our country, private spending on healthcare amounts to 35.2% of the total, ranking us third in the EU. The main goal is to strengthen the National Healthcare System (ESY) in general, and primary healthcare in particular. However, while neighboring Italy has earmarked about 10% of its funds from the Recovery and Resilience Facility to strengthen public healthcare, the Greek plan provides for only 4.5%.

In addition, in a country with a declining population and widening inequalities after 10 years of economic crisis, the problem of rising rents will have dramatic consequences, especially for young people. According to Eurostat data for 2019, 83.2% of tenants paid more than 40% of their income on housing expenses, while the EU average does not exceed 25%.

Greece’s deviation from other member-states is chaotic. Other countries with similar problems, such as Germany and Portugal, are using part of the Facility’s resources to finance housing policies, with Portugal building 26,000 low-cost housing units for rent. In the Greek plan, on the contrary, the only thing that is foreseen is the completion of the renovation program of just 100 apartments in Athens and Thessaloniki.

The above examples are part of a series of strategic priorities that, together with key regulatory interventions in the market, constitutes our social democratic proposal to solve chronic malfunctions and to make Greek society fairer and the economy more competitive.

We must not miss this opportunity.

We do not know when Greece will have at its disposal funds of more than €70 billion from the EU Recovery Fund, the European Structural and Investment Funds and the Common Agricultural Policy, all in such a short period of time. The centralized way the government plans to utilize these resources is likely to lead to a new failure.

* Nikos Androulakis is the leader of Movement for Change (KINAL).

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