Greece is all the rage among investors. The country that came to have a risk premium of more than 3,000 points in 2012 due to the threat of bankruptcy in the euro, which had to be rescued and refinanced several times by the European Union (EU), the ECB and the IMF, is now walking at a good pace in the markets. The spread on its 10-year debt with Germany has plunged below 140 points, almost half that of March, to its lowest level since 2021.
The Greek state now pays 3.83% in interest on its 10-year bonds, almost 50 basis points less than Italy (4.3%), 30 points less than the United Kingdom (4.1%) and practically the same as United States (3.77%). On that scale, Spain pays 3.47% this Tuesday for its debt. The victory of the current Prime Minister Kyriakos Mitsotakis in the elections last Sunday has not only clarified the political scenario in the country, but has put the wind behind the reformist agenda and financing in the country is cheaper compared to its partners. Europeans.
Despite the fact that he did not win with an absolute majority and has been on the verge of being able to govern alone, investors anticipate a clear victory for Mitsotakis in the second vote scheduled for June 25, which, due to the Greek electoral system, could give him all the power to continue with the economic reformist agenda that has given the country such good results to date.
The head of government took the reins of the country in July 2019 with a minority mandate but with the support of the socialist group PASOK and against the far-left Syriza party of Alexis Tsipras, who ruled from 2015 to 2019 in a period of deep political upheaval. in the country after the temporary corralito with which the legislature began. The Greeks have promoted Mitsotakis’s conservative New Democracy party and Nikos Androulakis’s PASOK party at the polls, although both parties went to the polls with the promise that they would not agree again.
Stocks rise in Greece
The Athens Stock Market shot up 6% on Monday and rose another 1.3% this Tuesday after New Democracy exceeded by ten points the intention to vote of 35% indicated by the polls and which pointed to a situation of blockade and difficulty in the pacts to govern. However, the electoral reform of the previous Tsipras government lowered the majority needed for a candidate to form a sufficient majority to 48%. However, the winner in the second ballot takes up to 50 extra seats to facilitate the unlocking, with which in reality the majority threshold is lowered below 40% of the total vote, that is to say, that Mitsotakis is guaranteed the election with absolute majority in parliament in June.
After a lost decade of growth and a public soaring to 356 billion euros, representing 171% of its GDP, Greece is taking accelerated steps to reduce its debt with large budget surpluses and growth momentum. Since 2020, the debt/GDP ratio has fallen from 206% to 171.3%, almost 35 percentage points less, making it the most indebted euro country but also with the best track record in its public accounts, which It will take IA to overtake Italy (144%) in less than two years if it continues like this.
The experts also highlight the better governance prospects for Mitsotakis compared to other European rulers such as Pedro Sánchez in Spain or Giorgia Meloni in Italy, who now depend on multi-coalition paths of up to 7 and 3 parties, respectively. In Greece, on the other hand, it is only a matter of two. New Democracy (ND) received approximately 41% of the vote, comfortably leading the main left-wing opposition party, Syriza (20%).
“An absolute majority would give Mitsotakis four more years in power with a cabinet of his choice. Greece benefits from stronger growth and lower inflation compared to the rest of the eurozone. Interest rate hikes due to Due to the long-term maturities of the debt obsessions, thanks to the royal packages received during the sis, there will be more than enough to Greece by 2026 and a 4% growth in employment,” says Eirini Tsekeridou, fixed-income analyst at Swiss bank Julius Baer.
Based on the latest information available up to April, Tsekeridou notes that the Greek government hopes to achieve “solid fiscal consolidation”, projecting that the debt-to-GDP ratio will fall by another 10 percentage points each year until 2026, reaching 135%. In his opinion, continuity in the government, with New Democracy obtaining an absolute majority in the second electoral round, would allow a greater implementation of reforms and the use of Recovery Funds (Next Generation), while maintaining the commitment to the fiscal consolidation, which could eventually allow Greece to regain its investment grade rating, i.e. a rating above BB+.