The formation of a government in Greece with a comfortable majority in parliament will strengthen the country’s economic stability, help the implementation of reforms and see Greece’s sovereign bonds return to investment grade very soon, benefitting the national economy further, analysts told Xinhua.
The center-right government of Prime Minister Kyriakos Mitsotakis has returned to power after the June 25 general election for four more years. It has a majority of eight deputies in parliament, the same as four years earlier when it first got elected.
The market’s immediate reaction was positive — the main index of the Greek stock market closed on Monday at its highest point since June 2014. Bank of Greece Governor Yannis Stournaras also said a Greek credit rating upgrade back to investment level after almost 13 years was possible after the government secures parliament’s vote of confidence, due on July 8.
“It is very important that a strong government has been elected, given also the fact that the economy requires reforms, and the international context is very demanding and unpredictable,” said Nikolina Kosteletou, associate professor in the Department of Economics at the University of Athens.
Commanding a robust majority will allow the government to implement its programs, she said, adding that the new government has the chance to proceed without needing the support of any other party.
“The post-election landscape in Greece and the emergence of a strong government contribute to forming a favorable environment that will lead to the rapid achievement of investment grade by year-end,” said Dimitris Kenourgios, professor of finance at the University of Athens.
Analysts stressed that the emergence of Greek bonds from the so-called “junk status” they have been in since 2010 will be crucial for the country’s economy.
Kenourgios said that such a development “would have favorable multiplying effects on all sectors of the Greek economy through the reduction of the cost of borrowing of the state and the enterprises.”
Kosteletou added that investment grade would not only allow healthy funds and other institutional investors from abroad to invest in Greek bonds, but it would also open the way to a series of other financing tools, such as social bonds, with multiple benefits for the economy and society.
