Financial analysts are expressing worries that the prospect of a general election could lead to a fiscal derailment with stagnation, if not backtracking on reforms, given the departures of some government officials from the ruling coalition who belong to the Independent Greeks party.
Sources say that the same concerns are also shared by the country’s creditors, which may well make things harder for the government during the visit of the lenders’ representatives to Greece next week.
Analysts agree that last weekend’s developments hardly came as any surprise. As a banking source noted, “even before the latest developments, the markets had viewed the country as having entered an election period, which contains the risk of delays in the application of structural changes.”
This has also been reflected in the low valuations of Greek securities (stocks and bonds) and the abstention of entities making direct investments.
Rating agencies and investors have long cited the “political risk” as one of the top concerns, and this is reflected in the creditors’ assessment reports.
However, a business source in Athens warned that “if handout talk goes on for 10 months, the economy will collapse.”