...and life goes on

Posted by Antonis D. Papagiannidis 22/05/2017 0 Comment(s) Economia Blog,

There is a strange sense of déjà vu, in this nth repeat performance of the negotiations routine of Greece with the country's creditors. After protracted negotiations, with much bluster and some real content, an agreement of kinds is reached; it gets passed in (Geek) Parliament with or without aftershocks (this time around, without); the creditors start towards doing their own part (in this last case, giving out some sort of roadmap for Greek debt relief) but their consensus gets derailed (this time, due to the looming German elections); a new exchange of negative feelings takes place (wait for today's Eurogroup); further dates are fixed for a new consensus to be attempted. And life goes on.

 

Still, it's interesting to note that little attention was given - in all of this turmoil - to the disturbing fact that the agreement reached and voted at Greek Parliament came after the second successive quarter of GDP decline (gentle, but still a recession); so, the "promise" of the new set of measures agreed upon would have one year and a half of expected growth for Greece - then, in 2019, a 1% of GDP chopped off through pension cuts; and, in 2020 if not earlier, a further 1% of GDP taken away through tax hikes (clawing back tax rebates). All of this, with the undertaking of the Greek Government that 3,5% of GDP would be achieved in primary surpluses (earmarked for debt service); only over and above that threshold, counter-deflationary spending and/or tax cuts would kick in.

 

Do you really think this will play out? Not so convincing. But, as everybody seems to think, life goes on!

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