Be­lief is ab­sent and hard to re­store

Opin­ion polls in­di­cate that Greeks have not been con­vinced by the Eurogroup agree­ment as doubt pre­vails

Kathimerini English - - Focus - BY NICK MALKOUTZIS

ANAL­Y­SIS If the gov­ern­ment was hop­ing that last month’s agree­ment with the in­sti­tu­tions at the Eurogroup in Lux­em­bourg would mark a sea change in the way that Greeks view their eco­nomic fu­ture, the opin­ion polls pub­lished since the June 15 meet­ing will have de­liv­ered a sober­ing re­al­ity check.

The sur­veys show that Greeks are not con­vinced that the deal struck to pro­vide Greece with another 8.5 bil­lion eu­ros in bailout fund­ing and to move the debt sus­tain­abil­ity dis­cus­sion on a lit­tle fur­ther will make a marked dif­fer­ence to their lives. Also, ac­cord­ing to the polls, they are not con­vinced that their coun­try is now on a path that will lead it out of the cri­sis.

A Uni­ver­sity of Mace­do­nia poll for Skai TV made pub­lic last Mon­day in­di­cated that only 10 per­cent of Greeks be­lieve the coun­try is on the way out of the cri­sis as a re­sult of the Eurogroup agree­ment, whereas 82.5 per­cent be­lieve that Greece was con­demned to con­stant aus­ter­ity at the meet­ing in Lux­em­bourg.

The poll­sters also found that only 7 per­cent of Greeks be­lieve that their fi­nan­cial sit­u­a­tion will im­prove in the next 12 months.

Of course, this is partly re­lated to the gov­ern­ment’s failed strat­egy. Just 16.5 per­cent think it ne­go­ti­ated ef­fec­tively on the debt is­sue, ac­cord­ing to the poll con­ducted for Skai, and only 13 per­cent of Greeks be­lieve the gov­ern­ment got what it wanted from the Eurogroup agree­ment.

How­ever, other polls also sug­gest that the neg­a­tive sen­ti­ment goes be­yond the mis­ad­ven­tures of the SYRIZA-In­de­pen­dent Greeks coali­tion and that it re­flects a broader fa­tigue that has un­doubt­edly been ex­ac­er­bated by the events of the last cou­ple of years.

A Kapa Re­search poll pub­lished in pre­vi­ous Sunday’s To Vima in­di­cated that only 23.5 per­cent of re­spon­dents be­lieve that Greece and its econ­omy are close to the point of leav­ing the dif­fi­cult years of the cri­sis be­hind, while 76 per­cent think that this is not the case.

A re­cent poll by ProRata for Efimerida ton Syn­tak­ton daily showed that 19 per­cent of those ques­tioned agreed to a lesser or greater ex­tent that the Eurogroup agree­ment reached on June 15 opens the path for Greece to exit the bailout and the cri­sis. An over­whelm­ing 75 per­cent did not agree that this is the case.

Ac­cord­ing to the sur­vey, Greeks’ most prom­i­nent feel­ing about the agree­ment was dis­ap­point­ment (35 per­cent), fol­lowed by in­dif­fer­ence (16 per­cent) and stress (15 per­cent). Just 5 per­cent said the deal filled them with op­ti­mism or en­thu­si­asm.

Apart from the weari­ness caused by the in­ter­minable cri­sis and the gov­ern­ment’s slipups, this neg­a­tiv­ity may also be caused by the nu­mer­ous loose ends that the June 15 agree­ment leaves. When the na­tional mood is pes­simistic, any un­cer­tainty is likely to be trans­formed into a worst-case sce­nario in many peo­ple’s minds.

One is­sue that the agree­ment did not re­solve is debt sus­tain­abil­ity. The ex­tent to which this is still a source of great un­cer­tainty was un­der­lined in the debt sus­tain­abil­ity anal­y­sis (DSA) put to­gether by the Euro­pean Com­mis­sion and pub- lished along with the Com­pli­ance Re­port is­sued by the in­sti­tu­tions.

The DSA deals with four sce­nar­ios go­ing for­ward. Sce­nario D as­sumes an aver­age nom­i­nal GDP growth of 3.5 per­cent be­tween 2019 and 2060, the pri­mary sur­plus is seen at 2.3 per­cent in the pe­riod be­tween 2023 and 2060, while the debt-to-GDP ra­tio is ex­pected to plum­met to 75.4 per­cent by 2060. This is the best-case sce­nario.

In the worst-case sce­nario, C, there will be aver­age nom­i­nal GDP growth of 2.7 per­cent be­tween 2019 and 2060, while the pri­mary sur­plus is seen at 1.5 per­cent of GDP from 2023 on­ward. The debt ra­tio is ex­pected to fall to 141.1 per­cent in 2030 and start ris­ing to 185.8 per­cent in 2050 and 241.4 per­cent in 2060. Clearly, this would be a dis­as­trous out­come for Greece as it would end up with a much higher debt ra­tio than the one of around 180 per­cent it has now.

Sce­nar­ios A and B are some­where be­tween the two, leav­ing debt ra­tios of 91.7 per­cent and 139 per­cent re­spec­tively. Clearly, there is am­ple room for doubt given the yawn­ing gaps be­tween the var­i­ous sce­nar­ios, par­tic­u­larly the two at ei­ther end of the spec­trum.

The for­mula for ad­dress­ing this is well-known and set out clearly in the Com­pli­ance Re­port. It con­sists of “sus­tained im­ple­men­ta­tion of the far-reach­ing re­form pro­gram” (in­clud­ing “strong own­er­ship on the part of the Greek au­thor­i­ties”) and “an ap­pro­pri­ate com­bi­na­tion of debt man­age­ment mea­sures.”

How­ever, the DSA adds another el­e­ment of doubt to the equa­tion by point­ing out that even if the two fac­tors men­tioned above are com­bined in the decades ahead, there are still other ob­sta­cles that could pre­vent Greece from end­ing up where it and its lenders would like.

“Debt sus­tain­abil­ity, and thus the need for ad­di­tional debt mea­sures, should be as­sessed in a man­ner that caters for a num­ber of down­side risks,” it reads. “There is un­cer­tainty sur­round­ing the ca­pac­ity of the Greek gov­ern­ment to sus­tain high pri­mary sur­pluses over sev­eral decades. In ad­di­tion, there are sig­nif­i­cant down­side risks to growth linked to ag­ing pop­u­la­tions and trends in to­tal fac­tor pro­duc­tiv­ity.”

It is worth not­ing that the In­ter­na­tional Mon­e­tary Fund’s mis­sion chief for Greece Delia Vel­culescu also men­tioned the ag­ing pop­u­la­tion as a cau­tion­ary fac­tor for longterm tar­gets dur­ing her con­tri­bu­tion to The Econ­o­mist Roundtable in Athens last week.

Given that Greece’s lenders are shar­ing pub­licly their hes­i­tancy about the fu­ture, it is only nat­u­ral that Greeks are un­able to view the com­ing years with great con­fi­dence.

The ques­tion that should trou­ble Greece’s politi­cians is what could change this. Will a con­vinc­ing agree­ment on debt re­lief (if such a thing is on of­fer) suf­fice to open the flood­gates and bring con­fi­dence rush­ing back in? Will the re­turn of growth and job cre­ation trig­ger a change in mood or can the trans­for­ma­tion be so grad­ual that many doubters will re­main? Can the im­ple­men­ta­tion of key re­forms al­ter daily life and the way the econ­omy func­tions to such an ex­tent that the pub­lic mood is lifted? Can a change of gov­ern­ment bring with it a wind of op­ti­mism that will sweep peo­ple with it? Are all of these things com­bined needed or will some­thing else be nec­es­sary?

The only cer­tainty when look­ing at the num­bers as they stand is that some­thing sub­stan­tial is re­quired to get Greeks be­liev­ing again.

IMF mis­sion chief for Greece Delia Vel­culescu men­tioned last week the ag­ing pop­u­la­tion as a cau­tion­ary fac­tor for long-term fis­cal tar­gets.

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