We’re not out of the woods
The gradual arrival of summer usually brings a sense of well-being and this year it seems to confirm the belief that Greeks are beginning to change their stance toward their new state of being, which is now more or less entrenched. It is true that people always seem to adapt, whatever changes life brings. However, the fact that Greeks seem to have adapted psychologically to the situation created by the crisis – at least those who have not been completely destroyed by it – should not be misinterpreted as meaning that there is stability.
The rhetoric of the past few days, giving the impression that the Greek economy is beginning to improve and that we are just around the corner from better days, is completely without foundation. The real economy and, by extension, society are still sinking. The data prove this in a merciless light: the decline in industrial investment last year stood at 20 percent and is expected to go down 7.6 percent this year, while deflation stands at 0.6 percent.
The few businesses that have managed to survive so far are choking due to the lack of cash flow, while as far as unemployment is concerned, let’s not even go there.
The euphoria over the arrival of hedge funds is equally illusory. Investors who are seeking yields are making a killing on post-PSI Greek bonds, which are now considered safe, and are going in search of short-term profits in Greece not because they are convinced that the country is on the brink of a rebound, but for the same reasons that they buy up the debt of other countries in Europe that have been hit by the recession: because of excess liquidity, coming out of Japan for example, which is searching for gains even if it entails risks.
For a more accurate picture of the Greek economy, look to the the recent reports by the European Commission, rating agency Fitch and Brussels-based think tank Bruegel. They all see political and social instability ahead, predicting more cuts to the tune of 4 percent of GDP for the crucial 2015-16 period. They also believe that Greece will need additional financial assistance for longer than has been predicted so far.
But the most important point is that even an inflow of capital such as that from hedge funds does nothing to affect the real economy or help it rebound so that it can generate employment and demand.
So while it is correct to say that morale seems to be improving in Greece, economic stability is still a very long way away. And it will continue to be a long way away unless something happens, unless there is a major change in the political path pursued on a national and European level.
