Sep 8th 2015, Greece's political parties discuss after-elections' governance & economy

September 8th

·         elections’ polls still show a neck-and-neck battle between SYRIZA (left) and New Democracy (centre right).

·         Tsipras sent unclear messages during his interview at Thessaloniki Annual Trade Fair. Although he reconfirmed his commitment to implement the 3^rd MoU, he rejected any idea to form a coalition government with New Democracy (centre right) after elections. Furthermore, he didn’t totally rule out the option to form coalition government with PASOK (centre left). At the moment, SYRIZA accepts Independent Greeks as the sole ally to form coalition government but it is highly unlikely that IG will enter in local Commons.   

·         New Democracy’s leader Meimarakis, reconfirm his intentions to cooperate even with SYRIZA in order to form a coalition government. He also offered the option to appoint a third party politician to the post of prime minister, even in case that his party will win elections.

·         Lafazanis, ex-SYRIZA and leader of the new eurosceptic political party LAE, accused Tsipras for having illusions, because he negotiated with creditors without a Plan B.   

·         according to data published by Hellenic Statistical Authority, capital controls impacted significantly local economy. More specifically, Greece’s Trade Deficit showed a reduction by -63.1% in July (compared to July ’14), which was the first month after the implementation of capital controls. Imports decreased by 32% but exports also decreased by 8%. The latter shows the dependence of local exports’ industry to imports.

·         Greece’s 10 year bond fluctuates around 9.2% (it reached 19.5% before the July 13^th agreement). Greece’s 2 year bond fluctuates close to 11% (it reached 58% just before the July 13^th agreement).

·         Greek government’s arrears to local vendors increased to the level of 5.7 bios euros (it was below 3 bios in the end ’14). Pension Funds (2.5 bios) followed by hospitals (1.2 bios), appear to be the biggest contributors of government’s arrears.

·         according to CNBC, international investors’ community should gradually return its focus on Greek economy. Similar views were expressed by Italian ENI’s CEO Francesco Starace and Italy’s Finance Minister Pier Carlo Padoan during Amrosetti Forum; both mentioned that Greece could become an investment destination soon.

·         trading volume in Athens Stock Exchange decreased by 51% in August (vs. June ’15). Due to capital controls, foreign investment funds were the only buyers in local bourse.

Risk assessment. The overall Greece’s country risk has been reduced significantly, since the agreement of July 13^th.  Although local political system is going through a tough structural change, it appears that this change tends to a more realistic and pro-European direction. The main driver of this change is Greece’s electorate pro-Europe opinion which according to all polls varies between 70-80%. It was the Greek electorate, which caused a) Tsipras’ U-turn and agreement of July 13^th and b) its ratification by an overwhelming majority of 220-230 MPs (out of 300) in local Commons.

It appears that economy will play significant role in the outcome of forthcoming election. The significant deterioration of all local leading economic indicators (despite the reduction of oil price, devaluation of euro and ECB’s QE), force the previously powerful Eurosceptic populist part of local political system (SYRIZA) to eliminate its populist rhetoric and to reposition its European agenda to a more Europe friendly direction.

In addition, the formation of caretaker government which consists of high calibre professionals/ex politicians coming from all parts of local pro-European political spectrum is an evidence of this change.