The coalition government after the second round of elections in the summer is now the main scenario for them investment houses And rating agencieswhile it is expected that the whole process will be complex and time-consuming, which will lead to possible delays both in its restoration, investment grade and in reform and investment promotion.

However, they do not see increased political risk in Greece. The country’s political landscape is different from what fueled Grexit fears in the past, leading to capital controls and shutting down banks and the stock market. The anti-European element is no longer there, as the mainstream parties seem to recognize the benefits of good relations with its institutions. European Unionfrom Recovery Fundabout her return economy. in surplus and recovery of investment grade.

Therefore, rating agencies are mainly looking not at the possible “color” or composition of the government, but at the fact that the policy will continue and improve the fiscal rate of Greece.

“We expect the policy to continue as the Recovery Fund creates incentives to continue reforms, however, a long election cycle may lead to some delays in the implementation of reforms,” notes on “K” V Nicola Jamesco-head of state expertise IRBM. And the markets, remembering the risk days of Grexit well, do not seem to see increased political risk in Greece, despite the fact that as things stand, there will be a coalition government, and this may take some time.

“Given the current context, the next government will not pursue a radical economic agenda. Markets seem to think so as the Greek 10-year government bond spread has not changed since the election date was announced. Indeed, the fact that Grexit risk remains at historically low levels helps calm the markets. Euroscepticism is also low, with Eurobarometer polls showing growing support for EU institutions,” said Paolo Griniani, Chief Economist at Oxford Economics.

In standby

At the center of the markets, as is logical, are the opinions of rating agencies, which should take a wait-and-see attitude until the election process is completed and a new government appears in the country. The Houses of Representatives see that these elections will be somewhat … episodic, and believe that there will be no independent government. But that doesn’t scare them.

The base scenario now is the formation of a coalition government after the second round of elections.

According to Fitch Ratings’ Mr. Barriga, a longer election cycle poses risks to policy implementation this year. “One of the risks is possible delays in the implementation of the stages of the Recovery Fund given the political cycle (and especially in the event of a change of government), as has recently happened in other countries of the European Union. So far, the Greek authorities have largely succeeded in meeting the objectives of the Recovery Plan, but any possible delays could derail some public investment plans. This can affect growth and confidence.” The House of Representatives, however, does not expect a long period of political paralysis or abrupt changes in policy, even if there is a change of government. “There is no indication that any of the main parties wants to deviate significantly from the current course of fiscal prudence and improved cooperation with European institutions,” the analyst adds.

As we enter an extended election period, Mr Zuzoulas of Axia Ventures estimates that there may be some delays in large public tenders and possibly slowing (but not canceling) the investment decision process for some projects. Of course, GDP is not expected to be hit as hard as there is a carry-over effect from a strong fourth quarter of 2022, he adds, while the election will not prevent investments that have already been given the green light from being implemented. implemented. In addition, rising minimum wages, falling unemployment and a gradual decline in inflation will continue to support consumption, while tourism is likely to rise this year with all its positive effects on the economy. In any case, as Mr. Zuzoulas emphasizes, “it must be emphasized that whatever the new government, it will have to meet the obligations of the primary surplus and the continuation of reforms.”

Another risk, according to Oxford Economics’ Mr. Griniani, comes from the current weaknesses in the international economy. “For example, if we see a new wave of an energy crisis, or if the current turmoil in the banking sector escalates into a full-blown financial crisis, Greece’s lack of a stable government capable of immediately responding to events could damage the country’s economic outlook.”

However, according to Scope, a serious negative impact on the Greek economy is only likely if there is a significant shift to the left in the elections – for example, if SYRIZA leads the next government or if the current electoral uncertainty continues for a longer period. . As Mr. Sen notes, the SYRIZA government scenario will disturb the market and negatively affect economic sentiment in the short term, but this effect is likely to be short-lived, as the political platform of any SYRIZA government turns out to be different from 2015. .

In addition to delays in reforms, there may be a delay in the investment stage. According to S&P, DBRS and Fitch ratings, the country is one step ahead of this milestone, now pre-election. However, the forecasts given by all three houses are “stable”, so they still have room before they become “positive”, which will also mean an increase to investment grade soon. If there is a coalition government, the houses will want to see an agenda to follow. If we didn’t have elections, the investment grade business would probably be much easier and faster. How much faster will it be if the elections do not change the current political landscape, ie. will be the independence of the ND.

As Mr. Sen of Scope explains
ratings, since December last year, the agency has been assigning Greece a BB + rating with a positive outlook, therefore, it is actively considering the issue of a delayed issue of investment grade. However, a condition for any further consideration of investment grade is the degree of continuity of progress made by the house in recent years, such as improving institutional relations with key European institutions, reducing the debt trajectory, rehabilitating banks, structural reforms and institutional reforms. “The current uncertainty around the post-election policy arc, and therefore around the continuation of the reforms of previous years, affects our forecast and investment grade timeline,” he stresses.