By Vassilis Kostoulas
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European Central Bank (ECB) President Mario Draghi bid “arrivederci” this week to the European central bank’s “Quantitative easing” program – which itself constituted a major milestone for the common currency zone.
While pumping some 2.6 trillion euros of liquidity into Eurozone economies, the one member-state with the most to gain from the state securities buy-back program, thrice bailed-out Greece, was left on the sidelines as a mere and often bewildered observer.
Draghi and his fellow ECB Executive Board members inaugurated the stimulus plan in January 2015, the exact same month when once-radical leftist SYRIZA rode to power in a snap election on the back of an anti-bailout, anti-austerity and Euro-sceptic platform. Nearly six months of shambolic negotiations followed with increasingly unbending creditors, followed by a controversial referendum in early July 2015. A “No” vote on an ultimately withdrawn offer by creditors, one spelled out in a convoluted question on the ballot, was the result.
With the whole world now watching, Greek Prime Minister Alexis Tsipras and most of his Cabinet ministers then suddenly experienced a dramatic “change of heart” vis-à-vis creditors – and their accompanying demands – in the days after the referendum. A transformed Tsipras, in fact, now said his government desired “even a partial participation” in the QE program.
More than a year later, in October 2016, Tsipras this time said Greece should be included in the QE program as soon as possible, in order to become a “magnet for investments”.
Fast forward another year, to December 2017, and the coalition government now realizes that Greece will not be included in the stimulus plan, with the Greek prime minister’s statements nimbly adjusted to reflect this reality. “I believe we will be included, but it’s not that crucial for us, as we believed before.”
If judged by the markets’ and investors’ reactions, however, failure to exploit the QE program negatively affected Greece’s fragile credibility and impeded its return to the markets. In practical terms, the battered Greek economy missed out on much-needed cheaper borrowing.
Based on initial assessments, via the QE program the ECB would have purchased Greek securities worth three billion euros, providing liquidity to capital-strapped Greek banks.
With the 2.6-trillion-euro stimulus plan, valued at one-fifth of the Eurozone’s GDP, the yield on 10-year state bonds in the euro area fell by 150 basis points, with the benefits particularly felt in equally bailed out (once) Ireland and Portugal.
Greece, however, didn’t exploit the opportunity, something that ranks as a major failure in the government’s economic policy over the past three years.
