Do miracles happen in Greece?
Do miracles happen in Greece? At first glance, some of what is happening does look like miracles. For example, in an overindebted country, benefits and aid of several billion euros is distributed easily, without strict criteria or other, trite, restrictions. This is how consumption is fueled. Consumption causes GDP to rise, and here lies the miracle: By consuming – not by investing and producing – we become richer.
In support of the “miracle” that we can get rich without investing, but by consuming, we channel a large to very large portion of our funding from the European Union for investments (the National Strategic Reference Framework and EU Recovery Fund) into consumption and imports for consumption, unemployment benefits disguised as education and retraining funds, allowances for social work, the beautification of churches, monasteries and other God-pleasing activities.
Another, separate “miracle” is the following: Greek wages are low (cheap labor remains a Greek “trump card,” as the educated but very cheap – at a third of the cost of the average European – Greek workforce attracts the multinationals that set up shop in our country) and they evaporate faster than in any other EU country – says Eurostat. Despite this, wages are proving robust enough for the state to – with the distributive system in place – offer a 7% (or more) rise in pensions from the new year. Isn’t that a miracle!
The government officially denounces inflation, but that is what the much-touted ‘growth’ is based on
Unfortunately, what seems to triumph against common sense and all economic textbooks, regardless of school of thought, is not miracles. It resembles more a type of intoxication that discovers magic money trees.
In the last two years, the government has distributed over 56 billion euros to deal with – but also under the guise of dealing with – the economic hardship caused initially by the pandemic and then the war in Ukraine. This 56 billion euros increased GDP by around 40 billion euros – you don’t call that a miracle. The abundant (for some) liquidity, combined with the consequences of the ongoing war on energy prices, production, international supply chains, and the huge – by European standards – profits with which much of manufacturing, industry, import and retail trade works in Greece, spurred inflation. The government officially denounces inflation, but that is what the much-touted “growth” is based on.
Maybe that is why they are content with promoting some “household basket.” Inflation nominally increases GDP. The debt-to-GDP ratio is thus decreased and it appears as if the Greek economy is reducing its debt and becoming more healthy – while the debt is actually increasing. Because so much of our debt is at fixed rates, inflation reduces the real value of the interest we pay – it’s estimated that we’re saving around 15 billion euros this year. Finally, thanks to inflation, the “engine of growth” – which is the companies’ real profits – increase, while real wages and salaries are reduced.
The economic growth touted as a mega-achievement is toxically dependent on inflation.
When inflation begins to decline, which will happen as Europe enters recession in 2023, the picture will begin to change rapidly. In 2023 the growth rate is predicted to be 1%. I cannot help but remember the prediction and anxiety of Nikos Vettas, the general director of the Foundation for Economic and Industrial Research (IOBE): Without reforms, he said three years ago, the growth rate of the Greek economy will be limited to 1% to 1.5% per year. That is what we’ll have if we don’t change. We haven’t changed.
