BUSINESS

Market grants no grace period for new Greek gov't

TAGS: Finance, Politics, Economy

Greece's center-right government, voted into power in Sunday's general elections, is granted no grace period but rather a trial period by the markets and the country's creditors, experts warned here on Monday, stressing the need for reforms and a delicate handling of the economy.

The country's conservative New Democracy (ND) party has secured an outright majority in the Greek parliament.

According to the final official results released by the Interior Ministry, ND received almost 40 percent of the vote and thus won 158 seats in the 300-member parliament.

It will be the first time since 2009 for Greece to be be ruled by a single party that holds a comfortable majority in parliament.

Analysts expect the new market-friendly administration to bolster growth and investment in an economy that lost 25 percent of its gross domestic product (GDP) during the financial crisis.

The prospect of a fresh administration in Greece less that a year after the country's emergence from the bailout programs has investors put their money where their hope is, Dimitris Kenourgios, associate professor of finance at the University of Athens, told Xinhua.

During the six weeks between the announcement of the snap election on May 26 and election day last Sunday, the general index of the Greek stock market rallied over 22 percent, while Greek bond and treasury bill yields dropped to all-time lows.

"However, the anticipation is over and now is the time for the application of the reforms needed. There is no grace period but a trial period instead," said Kenourgios, noting that the new government needs to implement key measures that will consolidate market confidence and earn the support of the country's creditors.

Antonis Zairis, vice president of the Association of Business and Retail Sales of Greece (SELPE), agreed, telling Xinhua that "It requires delicate handling, with solutions for a complicated situation. The government must agree with its creditors and implement a lower primary budget surplus, tax cuts for property owners and corporations, incentives against tax evasion, such as a greater tax discount based on online transactions, the improvement of public services such as security, and the reduction of the state so that it becomes more flexible."

Kenourgios added a few more points the market expects from the new government. "Bureaucracy must be reduced, some key investment projects stalled for years need to be restarted, and reforms such as the abolition of the so-called university asylum are required to restore confidence in the country," he argued.

The process will be long and arduous, warned Zairis, associate professor at Neapolis University Paphos in Cyprus.

"Eventually, Greece requires a new production model so as to reduce imports by producing what it needs to consume, while supporting the sectors where it performs best, i.e. tourism, shipping and exports, and repatriating its capital and human resources," he said.

[Xinhua]

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