Greek parliamentary report sees real danger of deeper recession or long-term stagnation

Gazzetta team 29 Οκτωβρίου 2015 - 19:24

“An agreement on a third bailout program, despite political difficulties, was the still remains more preferable compared with prolonging uncertainty or a possible uncontrolled default,” the Greek Parliament’s State Budget report said.

The report, released on Thursday, analyses Greek economic developments in the third quarter of 2015 and certified the return of the Greek economy into a recession, a return of unemployment to rising trends and of part-time employment since September 2015, adding to a decline in exports in the first half of the year.

The report noted that positive growth rates recorded in 2014 and in the first two quarters of 2015 have been reversed and warned “of a real danger for the country to slid into deeper recession or even a long-term stagnation”.

It stressed, however, that this danger could be averted on certain conditions and that the economy could return to growth rates in 2017. “The most important condition for a faster recovery and basically a sustainable recovery, was to eradicate uncertainty both on economic policy and the management of issues (such as reforms, privatizations, etc),” the report said, adding that “this will be achieved by following a road map of the new memorandum”.

The report also stressed the risk of uncertainty, fuelled by a constant seeking of equal measures, unclear positions on tax issues and improvisation on the pension system. Uncertainty was also fuelled by a negative position by all opposition political parties towards almost every measure of the third memorandum, despite the fact that the Greek Parliament overwhelmingly voted in favor of the memorandum.

The report offers answers to the question why the Greek crisis has not been overcome six years after the country signed the first memorandum in 2010. “An easy and popular answer was the intensity of the crisis and the austerity-cuts in wages, pensions and other spending, along with increasing tax rates which neutralized any favorable effects of reforms," it said.

"This answer is related with the wrong view that ending the austerity or abolishing memorandums were enough for economic recovery. But it is not complete because it does not focus on long-term illnesses of the country in production, reforms, failure to fully implement an economic policy. It underestimated the effects of uncertainty which was and still is the biggest threat to recovery."