The Athens/ECB version of the Delphic Oracle

by Antonis D. Papagiannidis


Ain 2008, almost 15 years ago, while the clock was already ticking for Greece’s financial crisis that led to the near-miss of Grexit in 2015, the Eurosystem central bankers and the Governing Council of the ECB convened in Athens to more-or-less celebrate the tenth anniversary of the launch of the third stage of EMU and the process leading to the  Eurozone creation (European Council of May 3rd, 1998).

This time around, the same country welcomed the central bankers of the Eurosystem and the members of the ECB Governing Council in a far better shape. After some 13 years spent under three successive Adjustment Programmes – the last of which ended in 2018 – followed by a protracted period of post-Programme further structural changes, Greece emerged in one piece. It won from one rating agency after the other the investment grade it now treasures – for reasons both symbolic and practical. (“Back from the cold” and other such formulations were used, in festive mood, in the Athens get-together).

The ECB Athens 2023 external Governing Council meeting, when initially planned, carried quite a measure of central bankers self-patting-on-the-back, since a ratcheting  string of interest rates increases for the euro seemed to have put – at least – a stop on inflation. (The ECB, as also the Fed and most Central Banks, was initially reluctant in recognizing the risks of having a serious inflation come-back). So, having now the comfort of a stop to monetary tightening through rate-increasing was indeed a cause for celebration. Christine Lagarde made reference to Cavafy’s “Ithaca”, where reaching the island after many trials makes one “wealthy with all one has gained on the way”. Everybody hopes that European central bankers have accumulated such wealth of Knowledge…

Still, as history has the habit, the October 2023 Athens ECB session co-incided with a renewed wave of uncertainty. With the Middle East flare-up might a new inflation upsurge occur due to oil-and-gas price spikes? Or will the signs of recession intensifying in Europe (the Manufacturing Purchasing Managers Index is clearly in negative territory since mid-2021, the German economy keeps swooning) take precedence? So the festive mood in Athens had to be restrained, as the perennial dilemma of tightening or loosening monetary policy sat along with ECB dignitaries at the Bank of Greece high table.

In post-meeting formulations, the position set out was that “rates are at levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to our target”. Also, future decisions will ensure that ECB rates “will be set at sufficiently restrictive levels for as long a necessary”. The appropriate level and duration of restriction “will follow a data-dependent approach”.

The Delphic Oracle would have been proud, indeed!