Foreign financial analysts are warning that the divorce between SYRIZA and Independent Greeks threatens the return of political risk to Greece, noting that a minority government could put the economy in significant danger, delaying the agreed reforms, such as privatizations, and the disbursement of the earnings of central banks from holding Greek bonds.
Rating agencies tell Kathimerini that political instability could hinder growth and threaten Greece’s return to the markets, while economists have welcomed the possibility of a snap election as that would reduce the risk of another “write-off” year for the country.
As Mujtaba Rahman, Eurasia Group’s managing director for Europe, says, “with the fact the government is pushing boundaries with EU creditors, over the unified wage grid or the extension of VAT discounts for Greece’s islands, combined with tensions in the coalition over the [North] Macedonia name deal, it’s clear political risk is back in Greece in a more meaningful way in 2019.”
“The current political developments are certainly not helpful, as the Greek economy is still relatively fragile, growth is moderate and the country needs stronger investment, which tends to be negatively affected by prolonged periods of political instability,” warns Moody’s senior vice president Kathrin Muehlbronner, adding that instability also hurts Greece’s market chances and its prospects of collecting central banks’ profits from Greek bond holdings.
Both Muehlbronner and Michele Napolitano, senior director at Fitch Ratings, say a snap poll would not be a negative development for the economy. “We do not expect early elections would markedly disrupt post-program fiscal and economic outturns,” says Napolitano, adding that “New Democracy is committed to continuing implementation of the reform agenda and therefore we would expect broad policy continuity even after a snap election.”
A minority government would not be a positive development, analysts agree, with Wolfango Piccoli, co-president of Teneo Intelligence, arguing that “even if [Prime Minister Alexis] Tsipras secures parliamentary approval for the Prespes deal and survives a censure motion, a SYRIZA-led minority government is unlikely to last until October, when the parliamentary term ends,” while a snap election “would reduce the risk that 2019 will be a write-off year due to the electoral cycle.”