A new cloud of uncertainty has darkened the economic horizon due to the emergence of incidents related to the banking crisis in previous days. Economists argue that growth prospects are worsening as uncertainty is always a bad investment advisor and no one is betting that the incidents in America and Switzerland were isolated and will stop there. In fact, many analysts expect more such incidents, and sources say a report was made by ministers and the Eurogroup last Monday.

This banking development comes in addition to the European Union’s shift to a more restrictive fiscal policy through a new Stability Pact from 2025 with stricter conditions, especially for over-indebted countries such as Greece. The tightening is actually starting this year under the Commission’s “fiscal guidance” that was recently adopted and calls for the gradual lifting of support measures against the energy crisis, and then for specific spending containment targets. This will be a sharp descent from a policy of concessions with a fiscal cost of 2.3% of GDP in 2022 for Greece, the third largest in the EU, to a policy of debt reduction.

As the economic factor describes it, “Already with high interest rates and the imminent implementation of the Stability Pact, tightening conditions prevail. They are expected to become even more intense due to banking incidents, which will make banks more conservative.”

There is, of course, another side to this unfortunate coincidence, the possibility of a more rapid containment of inflation, but at present this is a theoretical possibility.

Data available a few days ago showed that Greece is doing better than predicted. The 2022 budget is now estimated with relative confidence that it will close with a primary deficit close to 1% of GDP, compared to the 1.6% target contained in the 2023 budget report, while budget execution for 2023 also shows an excess of projected tax receipts and a surplus. In 2022, growth is estimated by ELSTAT at 5.9% against the budget forecast of 5.6%, and analysts are adjusting their estimates for this year as well. The Bank of Greece is already preparing to revise its forecast in the region of 2%, from 1.5%, while the National Bank and Alfa-Bank have also revised upwards, to 2.5%, against the budget forecast by 1.8%.

The EU’s turn to move to a more restrictive fiscal policy with stricter conditions will make it difficult for Greece.

Now, however, banking incidents threaten to slow down growth while holding up the narrative of the end of crises – financial, pandemic, energy. And while most analysts don’t expect an indefinite 2008-style crisis, they fear the problem won’t end anytime soon. “Uncertainty is not conducive to growth and especially investment, and the tightening complicates the conditions for their financing,” commented an analyst from the banking sector.

In any case, they note, Greece needs to turn the page and focus on achieving persistently high primary surpluses in order to reduce its debt and be able to service it when the grace period ends in 2032, as was also said by Bank of Greece Governor Yiannis Sturnaras.

Economists note that “we must educate people so that they stop waiting for money from the state,” as it has been done systematically and partly justified due to crises in the past three years.

It’s good that Greece is not at the center of these turmoil. However, it remains a weak link due to the very high public debt, and, as the economist notes, “when the markets are nervous, they look for weaknesses.” In this sense, it is now even more important to demonstrate commitment to the goal of reducing emissions, he adds.

Indicative of the situation, talks on a new Stability Pact at Ecofin last Tuesday took a step back as German Finance Minister Christian Lindner reopened a deal that was considered closed at the previous stage, calling for stricter conditions for annual monitoring of debt reduction. .