Election risk looms over Greek economy
Demonstrating fiscal responsibility will be crucial to meeting budget’s targets, experts warn
The election risk is perhaps the greatest challenge for the course of Greek economy, fiscal stability and the conquest of investment grade, in a year when international uncertainties are running high.
Bank of Greece Governor Yannis Stournaras has urged caution on the finances ahead of the elections, expressing widespread concern. The memories of the sacrifices of the years of streamlining are still fresh. While it is natural to want to forget those recent adventures, as the head of the Foundation for Economic and Industrial Research (IOBE) Nikos Vettas writes in Kathimerini, it is more useful to prevent new ones.
The government is brushing off criticism about handouts and is moving along the line that any excess revenues, thanks to higher growth, will “return as a dividend to those most in need,” State Minister Akis Skertsos writes in Kathimerini.
Critics of recent government support to vulnerable households point out that the country has given the third highest level of support in the European Union from its budget for the energy crisis in 2022 – 2.3% of GDP – and the highest if the revenues of the Energy Transition Fund are also taken into account. Since it is also the EU’s most over-indebted country, it should be more restrained and use the potential fiscal space to improve the fiscal result, experts in Greece and Europe argue.
However, the Finance Ministry cites better-than-expected results in growth and the 2022 budget, but also the decline in energy prices this year, which allow for support measures without fear of diversion.
Economics Professor Panagiotis Petrakis cites in Kathimerini an Athens University forecasts which predicts a primary deficit of 2.5% of GDP in 2023, although he himself states that he is not worried about a further deterioration in the event of an escalation of the political confrontation.
“The demonstration of fiscal responsibility by the entire political world is crucial,” argues Parliamentary Budget Office chief Frangiskos Koutentakis.
