Greek Business File, September-October 2020, No 127

by Antonis D. Papagiannidis

 

 

 

 

Will the Pissarides Report priorities and EU Recovery Fund financing allow for a real reboot of the Greek economy?

 

 

 

In an unprecedented five-day long Summit in July, the EU decided to adopt a 3-year Recovery Fund of €750 billion to jointly support the economies of the area in their effort to face the (increasingly severe, as the situation develops) consequences of the Covid-19 pandemic. The dimension of “unprecedented” arises not so much from the size of the project –optimistically labeled Next Generation EU– as from the fact that, pushing and shoving, the EU-27 accepted joint and several responsibility for the financial support of initiatives taken at the level of Member States. Coming atop the normal 7-year EU budget/MFF of €1.1 trillion, this is an important move translating to something close to 2% of EU’s collective GDP.

In order to make use of such a crucial financing opportunity, which for Greece amounts to over €32 billion, Greece should be prepared to present no later than October 15 a fully-fledged National Recovery and Development Plan; such National Plan should adhere to EU-wide guidelines, according to which support of the Union’s “Green Deal” as well as of the acceleration of the digital transition of the economy are of major importance. The National Plan should also follow broad recommendations of structural reform emanating from the “European Semester” procedure that is intended to provide country-specific guidance for EU countries’ own budgetary, macroeconomic and structural reform plans.

Since before the Covid-19 pandemic, the Greek Government had formed a Committee of economists, chaired by LSE Professor and Nobel prize-winner Chris Pissarides, to contribute with analysis and proposals to the overall mid-term re-orientation of the Greek economy. The Committee’s set-up, with AUEB Professor and IOBE director Nikos Vettas as deputy chairman, closely follows the participants’ list of the collective work “Beyond Austerity: Reforming the Greek Economy” (The MIT Press, 2017) which –coming after 8 years of global economic crisis– described the pathologies of the Greek economy, but most importantly suggested widespread policy reforms. From macroeconomic choices (that now seem clearly made for Greece), to markets’ regulations or financial issues, “Beyond Austerity” dealt not only with international competitiveness of the Greek economy, labor market modernization, and social security reform but also deeper changes in education and the judicial system.

The Pissarides Committee, once the Covid-19 pandemic struck and the ensuing economic ravages were evident, saw its remit importantly altered. Its Report is supposed to be the center of a wide-ranging debate between social partners and political parties, in time for a final version to be put forward and used as the core of the National Plan to be presented to Brussels.

An Intermediate Report was produced just before the August vacation, while the final version is awaited in mid-September. An initial list of priorities of the Pissarides Report included boosting investments as well as exports as a percentage of future Greek GDP; reducing the grey economy by ameliorating conditions for wage labor especially through the alleviation of non-wage labor costs; fighting endemic tax evasion; enabling the increase of the size of enterprises so as to allow the easier introduction of new technologies and modern management techniques;  allowing for faster amortization as well as lower energy costs in industry. The Pissarides Committee made it clear that its initial suggestions deliberately adopted a horizontal approach, i.e. refrained for indicating specific sectors, fields of endeavor or (especially) enterprises (“national champions”) that should benefit from Recovery Fund financing. Nor were indications of the National Plan’s future governance provided.

The  first roadmap for the future development of the (post-Covid-19) Greek economy put rather the emphasis inter alia on the need for a novel approach to Social Security, in ways that would allow for domestic savings to recover from the doldrums; on concerted efforts to ameliorate the status of salaried workers (as opposed to the prevalent self-employed); on incentives to increase the size of SMEs (also prevalent in Greece) – all of which aim to enhance productivity and allow a more extrovert, export-oriented, tradable-goods-based economy.

The Pissarides Report also included important suggestions for deeper structural reforms in the educational field, by linking Universities and Research Centers to production, or in the justice system, by accelerating procedures in cases of significant economic interest.

Such concerted efforts to plan ahead for the recovery and further development of the Greek economy, with the EU Recovery Fund financial support bringing about a new optimism (that has to be proved in fact), are undertaken in the most uncertain times for Greece: The Covid-19 pandemic is making a come-back; Greek-Turkish conflict over the Eastern Mediterranean sea areas is looming; most importantly, meaningful conversation over the essential issues of the very notion of economic development on new foundations –as opposed to just getting back to growth– is still a matter of wishful thinking.

The question remains: will a real reboot of the Greek economy be allowed to happen? Will some measure of consensus be able to emerge? Or will just one more round of political dissent let the efforts of the Pissarides Committee wane – just as the Spanos Committee[CK1]  efforts of the Nineties were left to wane and wither?  Will some measure of consensus be able to emerge? Or will just one more round of political dissent let the efforts of the Pissarides Committee wane? Just as the Spraos Committee efforts of the Nineties were left to wane and wither or as the suggestions of Lucas Papademos (when he left as Prime Minister, early 2012) for structural reforms were forgotten soon afterwards.