Ignoring the fault in the Greek economy

The government had initially planned to gradually start lifting support measures from April, but the progression of the pandemic is not helping. That plan has been pushed forward by several weeks, to May, with the expectation of a partial offset of the negative effects from that delay from the revenues of the tourist season, whose start, however, has also been put off. The much anticipated launch of the tourist season has been pushed back to late March, while real tourist inflows are not expected to begin until May. The realistic expectation is for tourism revenue this year to be 30-40 percent of what it was in 2019 and for economic growth to be between 2.5% and 3% – significantly lower than earlier estimates. The Greek economy will see a full recovery much later than initially estimated, and it won’t be for everyone. A great part of the economy will collapse – indeed, it has already collapsed and it is just that the support measures are hiding the fact. Another part that manages to get by, somehow (since the state pays the rents, the wages, the fixed costs and also provides some funding with advance payments, substituting for the unwilling banks, and debt haircuts), will find it very difficult to resume normal operations and pay the bills, which may be pushed back but still keep accumulating. Unemployment will be the great problem; actually, there is no business that is not planning layoffs.

Another part of the economy will rebound and will be able to take advantage of the positive climate and expectations that the pandemic will start ebbing during the summer, expectations that are much higher for the fall. This part will be supported by the EU’s Recovery Fund. But the Fund will not provide support indiscriminately. It is an instrument for the transfer of resources, human and capital, from traditional to modern sectors, to help growth through the green and digital economy. The variability of speeds at which different parts of the economy move will become even more apparent – between the very small businesses and the zombies, on the one hand, and the modern segment, on the other. 

If there was a complete, integrated plan and strategy, this modern part could also function as a shock absorber, decisively facilitating the restructuring of part of the old economy, helping rebuild and modernize many small and medium-sized enterprises that are capable of survival, so that they can be lifted together with the modern sectors and have a part in the day-after recovery. But such an ambitious plan does not exist, nor is there a simpler transition plan, such as other European and non-European economies have. But their economic fundamentals are strong, not like ours. So, one can easily forecast the fault in the Greek economy, a fault that will cause a succession of shocks in society and politics. The fact that the political class not only doesn’t deign to occupy itself with such issues, but plays games of blind polarization and discord aimed at vanquishing the enemy, merely makes things worse.