The European Commission cannot be blamed for keeping Greece in check after spending money it could not afford on donations. [Reuters]
The European Commission has decided to extend the suspension of the Stability Pact on public debt (60% of GDP) and budget deficits (3% of GDP) by one year, until the end of 2023. This was planned. What was not planned is that this extension would not be general and for all countries, without exception. Instead, the Commission should advise the Eurogroup to strictly control spending by heavily indebted countries. This means that this relaxation will only be available to countries that have the money to spend. Not for Greece.
This should come as no surprise. Our country, because of its huge debt, needs to run a surplus to regain an investment grade credit rating and get its bonds out of the junk category. Even if we were (hypothetically) encouraged to slack off, we can’t afford it and we shouldn’t because, besides the Commission, there are also the markets. They monitor, assess and post the bill when we apply for loans. The last time we asked, their reaction was not good. Relaxing would not be wise.
However, it seems that the Commission does not feel comfortable enough to trust our political system. The clientelism displayed when spending 43 billion euros of Greek taxpayers’ money in the first two years of the pandemic, the persistent practice of horizontal subsidies and, to top it off, fears that the road towards the next elections could bring, contributed to the impression that preventive measures were necessary.
Essentially, the post-bailout monitoring which will officially end in August, as agreed in 2019, will continue until the end of 2023. Until then, any decision on permanent measures with budgetary implications (tax cuts, etc.) will have to be approved by the European institutions.
Unfortunately, the clientelist management of 2020-21 was not without consequences, and not only for our image in Brussels. Look at the plan for the so-called corporate merger incentives.
A big obstacle to the growth of the economy and wages in Greece is the vast archipelago of very small businesses, most of which survive illegally and without a future. The causes of very low labor productivity must also be examined within this framework. Technological innovation and improving the quality of the workforce require large, strong companies. In Greece we only have 400 companies that can be called large. We need more, and stronger ones too. Almost everyone agrees that incentives should be provided to achieve this. However, because the management of 2020-21 has exhausted our country’s budgetary limits (especially after our previous attempt to approach the markets), combined with a widespread fear of potential deficits, the relevant legislation includes only some very basic incentives. and very limited. They are most likely aimed at very small unsustainable businesses, which can, together with another very small unsustainable business, form a new very small unsustainable business. In terms of clientelism, this makes sense, especially during an election period. Economically, if the objective is to create sustainable and solid companies, it makes no sense.
What I’m saying is we’re wasting money, because we don’t have any, because we wasted a lot of money last year and the year before. It is not the fault of Brussels.