Why does the “ship” of the Greek economy endure while the recession threatens the Eurozone

By Chrysostomos Tsoufis

The OECD was the latest to be added to the long list of houses, analysts and institutions that estimate that there is a significant risk that the ocean called the Eurozone will collide in 2023 with the iceberg called recession. In his base case scenario he predicts almost stagnation, GDP growth of 0.3%, but if the winter is very cold and alternative supply solutions are not secured and at the same time a significant reduction in demand is not achieved, then we are going for a recession of 1.3%!

The intense flirtation with the recession is also confirmed by the course of oil prices which are falling slowly but steadily – from $117/barrel on June 27 to $86 dollars yesterday -, the consumer climate which is at the worst point of all time, the stock markets which are painted red – the European index has lost 457 points in the last 40 days even Christine Lagarde’s latest statements that interest rates in the Eurozone will continue to rise for several more ECB meetings, even if this will hurt economic activity .

In this rather gloomy climate, there was a flurry of good news for the Greek economy, which by no means should lead to over-enthusiasm as everyone emphasizes.
At a time when the GDP estimates in the vast majority of Eurozone countries are being revised in hand – as was done, for example, with the 4 largest institutes in Germany yesterday -, Christos Staikouras and Theodoros Skylakakis from the ECONOMIST platform reaffirmed that the Greek economy will ran this year with 3.1% that the budget predicted but with 5.3%. And not only that, but also against the international trend, it will avoid recession in 2023 as well with a nice +2% that will lead the GDP to €220 billion at the end of the next week. Tourism, investments and the funds of the Reconstruction fund are the reasons that the Greek economy … floats.

Even more optimistic is the Governor of the Bank of Greece, Yannis Stournaras, who puts 6 ahead of this year’s growth rate, while for 2023 he estimates that the economy will grow by 2.8%. At the same time, the president of the Union of Banks Vassilis Rapanos spoke for the rationalization of the balance sheets of the Greek banks, a drastic reduction of bad loans and increasing financing of the Greek economy with €17.2 billion in 8 months (compared to €20 billion the whole year last year).

Exceptionally, the news from the front of the execution of the budget showed against every forecast a primary surplus of €19m with…fueled by the accuracy and the amazing fiscal responsibility of the taxpayers – natural persons and businesses -.

The icing on the cake was put by the head of the ESM for Greece, Paolo Fioretti, who estimated that it is possible for the country to recover its investment grade – probably in the second half of the year so that the adventure of the double(?) ballot box is over. All this while the president of Rochefeller International, Ruchir Sarma, described Greece in an article in the Financial Times as one of the 7 modern economic miracles, next to Indonesia, Japan, S. Arabia, Vietnam, Portugal and India.

A unique dissonance is the cost of borrowing, which continues to increase as the fears of recession and inflation were added to the political uncertainty after the results of the Italian elections. Greek 10-year bonds were at 4.7% at a one-year high, while Italians were just 150 basis points lower at 4.55%.

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