Οf dubious European gifts borne to Greeks

by Antonis D. Papagiannidis

A peculiar reversal of the “Timeo Danaos et dona ferentes” dictum, that is of “Beware of Greeks bearing gifts”. Nowdays, it might be Greeks who should beware when Europe/European leaders came forward with positive pronouncements about their country’s current achievements and perspectives.

Fresh-from-the-oven German Finance Minister Christian Lindner unexpectedly called for Germany to emulate Greek “impressive” structural reforms undertaken even under Covid-19 conditions; his own country should “aspire to become as ambitious as Greece’s domestic policy”.

Equally interesting was the remark emanating from Chancellor Scholz – who was Finance Minister for the last 3 years, so was really entitled to say “we have worked very hard to cooperate with Greece in recent years” – that “we now have a situation in Greece which is to be understood as a good process of recovery and growth”.

Such pronouncements are quite valuable, since Germany will play a leading role in the overhaul of European fiscal policy to take place in the first months of 2022. In the Emmanuel Macron long-winded presentation of concurrent French Presidency priorities, “a new model for growth and investment in the EU” becomes a central element of this same crucial negotiating process: how far will the equilibrium of growth with fiscal rectitude shift, post-Covid pandemic?

Of course, no good news come without some kind of draw-back. Lindner was also on record that, according to the new Berlin Government, the Eurozone should stick to the commitment it has to stability, “together with efforts on growth and investment”. Such would be the German contribution – decisive as is always the case – when in the first semester of 2022 the EU fiscal rules will come up for review, especially so the escape clause of the Stability (and Growth…)  Pact which has been activated as a response to the Covid-19 pandemic.

It goes without saying that over and above such fiscal front, of essence for Greece will be the monetary policy applicable in the Eurozone over the very next period. The ECB has been kind enough to include Greece – still lagging behind investment grade – to its PEPP (meaning: Covid pandemic-related) quantitative easing programme . Now that PEP edges towards its end – although the mid-December ECB meeting might push definitive decisions to the first months of 2022… – the main question for Greece would be how the Bank will devise a trick to keep holding Greek paper  of 34.9 bn euros worth (an important part of the 93 bn euros of outstanding market-traded Greek bonds). Playing with the “capital key” of national Central Banks in the promised roll-off/reinvestment of maturing principal payments for bonds purchased by the ECB under PEPP might do the trick..