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Greek PM’s chief econ adviser points to 4 reasons to expect strong recovery in the country

The Greek prime minister’s chief economic adviser Alex Patelis, on Wednesday used a recent cover in New Yorker magazine, which foreshadows a post-pandemic return to normalcy, to point to a robust economic recovery for Greece.

The center-right government of Kyriakos Mitsotakis is now banking heavily on a higher-than-average economic rebound, compared to other Eurozone-members, in a bid to dominate the country’s political landscape in coming years. Ruling New Democracy (ND) party’s chief political rivals, leftist SYRIZA party, and its leader, former prime minister Alexis Tsipras, appear unable to capitalize on whatever popular discontent in the country after months of lockdown and pandemic-related economic repercussions.

In a post on his FB page, noted economic analyst Alex Patelis ticked off four “good reasons”, as he said, to expect a strong Greek economic recovery.

“Like elsewhere, Greece has seen a surge in bank deposits, over 24bn EUR, or 14% of GDP since early 2020. Some of this will filter back into the economy as Covid uncertainty subsides.

“… In 2020, a swing in the current account chopped 5.3pp off Greece’s GDP. This will swing back and possibly even overshoot. Inter-temporal utility smoothing from Economics 101 teaches us that if the world severely under-consumes services –such as tourism– for a period of time, it is likely to over-consume –not just return to trend– in the period after.

“… Over the past year or so, we significantly cut taxation for labour and capital; where else have you seen this? Second-round effects from this structural –not cyclical– shift should manifest themselves most strongly in the post-pandemic period; similar structural changes in the fight against tax evasion.

“… Greece 2.0 consists of 68 reforms and 107 investments. The updated request schedule now foresees a total of 7.5bn EUR disbursements in 2021, or 4.4% of GDP, more than previously expected.”

The reference to “Greece 2.0” in this case is the Mitsotakis government’s blueprint on how to exploit and allocate funding from the EU’s recovery fund.