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Concerns over the restart and hopes for a new surprise

The government managed to respond to the unprecedented challenge we face with admirable reflexes: it made very difficult decisions when other major European countries failed to do so, minimizing human losses and keeping the health system afloat. This success has been recognized, after many years Greece is covered by the international press in a positive light and is mentioned as a model country in dealing with the current crisis. However, the state of the economy does not inspire any confidence.

The difficult task of restarting the Greek economy begins next week after the unprecedented collapse of the economy caused by the lockdown aimed at stopping the spread of the pandemic.

Yesterday, Greek Prime Minister Kyriakos Mitsotakis presented the timeframe for the gradual exit from quarantine, warning that "there is no return to the pre coronavirus reality", while concerns for the next day amidst businesses, employees and the self-employed are widespread.

With the economy frozen for weeks, many are skeptical about the possibility of recovery and fear for what is coming. The questions are endless: even if shops open, how many will be in the red, how will restaurants and cafes operate the new health conditions, who will consume in an environment of extreme uncertainty, how long will a small business or retail store survive with demand in sharp decline, who will invest and on what terms, what will happen to tourism and the dozens of sectors that rely on it, what will happen to banks, what will happen with the state and private debt, what will happen to with employment, what will public finances. And many, many, more questions.

The government managed to respond to the unprecedented challenge we face with admirable reflexes: it made very difficult decisions when other major European countries failed to do so, minimizing human losses and keeping the health system afloat. This success has been recognized, after many years Greece is covered by the international press in a positive light and is mentioned as a model country in dealing with the current crisis. However, the state of the economy does not inspire any confidence.

Ossified in the big battle

The pandemic may be an extreme external factor hurting the global economy with Europe, America, and Asia anxious to restart the day after, but Greece will have to achieve a double target: restart and stabilize the economy without the strength and resilience of other countries.

Greece must survive and remain standing during the heavy winter, if not icy winter, which is coming fast without a trace of "fat" in storage.

Unfortunately, the fat that was formed in the days of the fat cows, in the 1990s and 2000s, we unnecessarily consumed in the previous decade. At a time when the world economy was growing rapidly, Greece wasted time and energy on illusions, in a sterile memorandum-anti-memorandum conflict, leaving a relatively limited economic crisis to turn into an economic fire that engulfed the country.

Political personnel, absorbed by sterile political conflicts reminiscent of the 1980s, left the country on autopilot, indifferent to the digital revolution, avoiding the modernizing of public administration and the strengthening of the country's position in the internationally competitive environment. At the same time, politicians kept pushing back difficult problems, such as non-performing bank loans and the handling of private debt.

And this is how the new crisis, caused by the pandemic, finds Greece and the economy, weakened and ossified from the many years of the economic crisis that preceded it.

With 75 percent of households having deposits below 1,000 euros, no income, with 2/3 of employees having a salary below 1,000 euros and half the companies carrying bad loans and debts to the tax authorities, the country was exposed even to small shocks, and much more to something as unique and severe like the crisis currently experienced by the world economy.

The Greek state cannot do much. Unlike other European countries, Greece is already heavily in debt without sufficient resources to strengthen the private sector and with a public administration that, even if there were sufficient resources, is doubtful whether it could manage them effectively. The same goes for banks that remain weak under the weight of non-performing loans - a legacy of the financial crisis.

Thus, Greece is facing a new severe crisis, in a weak position:

  • With the highest public debt in Europe.
  • With high private debt and the largest stock of non-performing loans in Europe.
  • With the highest unemployment and the largest number of long-term unemployed in Europe.
  • With the highest divestment levels seen in peacetime.
  • With the economy overly dependent on tourism and services that will be under the greatest pressure due to the crisis.

How can Greece surprise (again)

Although many people today find it difficult to be optimistic, there is still a chance of a second positive surprise. Kyriakos Mitsotakis understands the depth of the problems, consults experts and not party officials, and can make decisions. So, if with the same determination, and the right choice of people, he sets up a task force to oversee the recovery of the economy, conditions can improve.

It is no coincidence that a few days ago he met with the leaders of the major construction groups to speed up public works, while the government is working on ways to end the current embarrassing situation, where a project tendered today may start in more than 5 years. The situation requires speed.

The government should mobilize European resources and channel liquidity to boost business, employment, entrepreneurship, and investment.

The Prime Minister should use the trust he enjoys from most of society to achieve the country's big step forward with reforms that will bring Greece back on the path on a convergence path with the EU.

Additionally, the fact that the country has managed to limit the pandemic, and set a positive example, creates an intangible asset, a surplus-value, which must be protected and exploited, especially in the tourism sector.

The rapid digitization of the state over weeks, an effort that must be continued and expanded, maybe the end of an era for a public administration that had remained stuck for decades.

But all this will require money. A lot of money. And, given a limited lending potential, Greece should resort to all available EU financial resources, and channel liquidity into supporting the economy and businesses. The country does not have the opportunity to delay due to political costs and be drawn into a sterile memorandum-anti-memorandum conflict for the second time, and be swept away by new political games that we have not only paid for dearly but will be paid for by future generations. 

Bank of Greece governor, Yiannis Stournaras, noted last week that Greece will not confirm the worst-case scenarios for the recession that have been published recently, stressing that the basic scenario for the 2020 recession sees a 4 percent drop in GDP. At the same time, IOBE estimates see a recession near 5 percent if the economy starts operating relatively quickly, and a 10 percent contraction rate if there is a new outbreak of the epidemic and a delay in the reopening of the economy.

The good scenario for reducing the recession to the lowest possible rate this year, with a dynamic return in 2021 (with the much-heralded "V-shaped recovery") is not beyond the capabilities of this economy, this country. However, a lot of work is needed from every one, with proper guidance and bold decisions from the government and without getting caught up in dilemmas of the past (memorandum - anti-memorandum), which would plunge the country back into division and would not allow us to take advantage of all the financial opportunities the European Union offers, and will offer in the near future.

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