Complete derailment of the Greek economy in 2015

Complete derailment of the Greek economy in 2015

Athens, October 30, 2015/Independent Balkan News Agency

By Spiros Sideris

“The agreement for the third memorandum, despite the political difficulties, was and still is preferable to the extension of the abeyance or a potential disorderly default”, writes the quarterly report of the State Budget Office of the House that was made public.

The report, which describes the developments in the Greek economy in the third quarter of 2015, certifies the return of the Greek economy in recession, as well as the increase once more from September 2015 of the unemployment and partial employment, which are added to the reduction of exports in the first half of the year.

“In total, the albeit moderately positive trend recorded in 2014 and in the first two quarters of 2015 has been reversed” stress the report’s authors, warning that “the real danger is for the country slide into deeper recession or a long-term stagnation” .

It is noted, however, that this risk can be prevented conditional and ultimately for the economy to return to growth in 2017.

“The most important condition for faster recovery and, most importantly, to achieve it on a sustainable basis, is to eliminate the uncertainty both as to the general direction of economic policy and in terms of management issues (such as reforms, privatisations, etc.)”, is highlighted in the report, which states that “this can be achieved if the roadmap of the new memorandum is followed”.

The report highlights the risk of uncertainty, which as noted, is fed by the “contimuous search for equivalents, adjustments (which may in some cases make sense, but their are fueling uncertainty), ambiguities in tax matters (rent tax property, VAT on education, ENFIA), the redesigning of social insurance, etc.

Uncertainty is also fed by the negative attitude of the entire opposition in almost every measure of application of the third memorandum. And this despite the fact that it supported it during the vote in Parliament, in accordance with the policy indicated by the third memorandum. ”

The report poses the question: Why six years after signing the first memorandum in 2010 the Greek crisis is not overcome?

And answers: “The easy and popular response corresponds to the duration and intensity of the crisis, in austerity within the eurozone – wage cuts, pensions and other expenditure – and increases in tax rates that outweighed any possible favorable impact of reforms.

This response is associated with the false assumption that it is sufficient to stop the austerity or abolish the Memoranda in order for the country to recover.

But this thinking is not complete because it ignores the country’s ills regarding production, the reform lag, the bad mix of measures, the emphasis that was given on taxes, retractions, and especially the importance of uncertainty about the economic course. It underestimates the impact of uncertainty in the general direction of economic policy, which was and remains the greatest threat to recovery”.