The economic impact on the global, European and therefore Greek economy can hardly be estimated at this stage, as it depends on the final outcome of the battle with the coronavirus and the time it will end. The coronavirus pandemic will hopefully end sometime, with the discovery of the cure drug and the vaccine, which is something everyone around the world is hoping for. Nevertheless, the “next day” situation will be “low-key”, with unprecedented expectations, as it will continue to be based on negative growth rates on economies and generate less income to serve unsustainable and unsustainable debts.

The IMF and the OECD are reporting that the global recession is now a reality, with 80 countries in need of 2.5 trillion euros in financial assistance. The leaders of the G-20 countries, recognizing the huge problem in emerging economies, have decided to raise $ 5 trillion in global financial networks to tackle the social, economic and financial consequences of the pandemic. The United States has also been slow to fight the economic stifle, with the largest package ever approved by Congress for $ 2 trillion to support citizens, businesses and banks.

The eurozone economic climate index was already down dramatically by 9 percentage points in March, after a dip of 19 points in Italy, while Greece had the mildest decline by 4 points. A deep recession is also erupting in the EU-27, with the European economy shrinking by more than 5%, while the ESM and the “counterparty” have flared, with Germany and its satellites deafening to 9 countries-members and the ECB’s recommendations that strong economies will lose 3% of their GDP each month. The EU has to realize that the coronavirus speed has overtaken the European policymakers to start thinking and planning, when and how to start paying for the invisible, but the specific war against the effects of the pandemic.

The Eurogroup of April must definitely submit a comprehensive proposal on how and how soon it will start paying its coronavirus bill. EU finance ministers are urged for the “next day” to decide to allocate money to curb the escalating economic impact.  Aside from the question of where the money will suddenly be found, there is another question, who will pay the bill? Given the experience of previous crises and especially in Greece, the answer is to over-indebted the weak economies of the member states of the European south.

The proposed solution for the issuance of the famous «corona-Eurobond» with guarantees by all European economies, and especially Germany, is essentially to issue a “blank check” with an open expire date and send to all the national economies, whatever inflationary fears, in order EU countries to cover their needs in dealing with the crisis. Another very offensive solution, but which requires universal joint action, not only by Europe’s leaders, but by the whole planet, if they really want a “general restart”, is to simultaneously “haircut” the debt of all member states, and third countries, as has happened in the past, after catastrophic world wars.

The pandemic is already raising government budget deficits, eradicating surpluses from the economies that produce them, and dropping their sovereign debt.  The underlying principle of the economic policy says that debt slows by growth, but this is true under normal circumstances when there is an elementary relationship between the level of debt and the level of the economy. Today, conditions are unprecedented, with already high debt rising as the economy collapses and requires to be faced with a “war economy”.

Greece has announced on its own economic sources, a coherent 6.8 billion-euro package of direct support for those who are directly affected and cover basic needs by April. If the crisis persists, however, it will require another package of spending that is still excluded from measuring public debt in terms of post-sovereign supervision but will have to be paid when our country’s cash reserves are sufficient by the end of June.

The pessimistic picture of the economy the day after the ‘lockdown’ shows closed businesses, rising unemployment, zero or reduced incomes, indebted households and businesses in banks, the tax office, and insurance funds. Even with the optimistic version, businesses and households will be called in from July and September after postponements to pay accumulated installments to the tax office, banks, and funds, plus of course the current tax liabilities. In short, taxpayers will be required to pay taxes on 2019 income with no or limited 2020 income.

The EU must finally “open its safe” and do so without further delay; it must reluctantly sign checks for its member states in order to prevent the evil coming face-to-face with it.  Let us hope that logic will reign in time and solutions will be given to all the visible and invisible fronts of the peculiar war we are experiencing.

04/02/2020