When the Budget debate gets launched – in every country but especially so in smaller countries with small, open economies – a major factor so as to assess its credibility is the climate prevailing in the world economy.
In the case of Greece whose ties with the EU and the euro area are preeminent (true enough tourist flows come also from Russia, Turkey, the East and the US while tourism account for something close to 20% of GDP; but even then Germany, the UK, Scandinavia and Central Europe are the heavy-weights), the health of the European economy has to be closely watched.
So, Christine Lagarde’s call – echoeing earlier of vocal statements Mario Draghi at the helm of the ECB – for Governments to assume their own responsibilities at the controls of fiscal policy since monetary easing shortcuts can no more be relied upon, should be carefully heeded our side. Germany has avoided being pushed over to technical recession, since its 3rd quarter squeezed out a drop of growth (+0.1% instead of -0.1% as expected by analysts, after following a -0,2% contraction in the 2nd quarter). Still, the German as well as the Italian economy are expected to have a greyish 2020.
The IMF’s World Economic Outlook has been constantly revising growth forecasts downwards for the EU, even more so for the euro area, with the 1% mark looming large for growth of the latter. The EU’s own Autumn Forecasts have been careful enough to use as an opening statement the reminder that Europe is in its seventh consecutive year of growth, with expansion forecast also for 2020-21; still Euro area GDP growth for the current year is forecast at 1.1%, for 2020 at a paltry 1.2% (down 0,2% compared to the Summer Forecasts). So, Greek Budget discussions should tread carefully.