Critical decisions for the economy within the next five days

Of Tasos Dasopoulos

The decisions of the informal summit in Versailles and the meeting of the ECB in Frankfurt are being turned today by the financial staff, in order to design the new scenario for the economy as well as the new measures against accuracy.

The ECB is expected to send a message of continued favorable economic policy, having assessed the first consequences of the war in Ukraine, which are reflected in lower growth and higher inflation.

The decision in the current monetary policy council will not be easy, as the so-called “hawks” believe that the significant drop in unemployment in the Eurozone to 6.5% combined with high inflationary pressures will soon lead to new pressures for wage increases. which will make it more difficult to de-escalate inflation.

In any case, the Ministry of Finance claims that the ECB and the Fed seem to share the view that as the war continues, more emphasis should be placed on supporting the recovery of economies, leaving the difficult task of controlling inflation for the period when the situation will normalized.

The signal of the continuation of the extremely favorable monetary policy by the ECB is expected to have favorable consequences for the Greek bonds as well, restraining the borrowing costs.

The second important meeting will be the informal summit in Versailles, where EU leaders will discuss not only the completion of sanctions on Russia and Belarus, but also the plan for dealing with the energy crisis and European defense policy. The top issue for Greece will be the French proposal for a common European energy and defense fund.

Athens has to expect from the two-day Summit a joint European action with which it will be able to continue to subsidize households and businesses for as long as needed, without having to threaten its fiscal stability.

This is because in addition to the decisions on the establishment and financing of the new Fund, which will be made jointly borrowed by the European Commission, it will have to be decided that the Member States of the Union, which owe more than 60% limit.

Because the debt reduction rule may not apply in 2023 either, but for Greece, Italy, Spain and Portugal there will be a restriction on the increase of expenditures other than those related to public investment.

The new European policy on energy security, price control and energy “dependence” on Russia’s fossil fuels will be discussed at the general meeting.

Also, on the issue of building a common civil defense, the request of Greece and other Eurozone countries to exclude defense spending from debt and deficit will be discussed.

Exit from enhanced supervision

Another important date for Greece will be Monday’s Eurogroup. In addition to the formal approval of the report for the 13th assessment of the Greek economy, the road map of the country’s exit from the regime of enhanced supervision will be discussed.

Greece has already committed to complete the vast majority of the commitments it had made in 2018, until the middle of the year, in order to get the exit ticket by August 21st.

The only issues that will remain open are the ones that delayed the outbreak of the pandemic. What will be agreed at the meeting of the Ministry of Foreign Affairs is that these issues will be monitored in terms of their progress, through the semi-annual evaluation regime, which the country will go through from September.