Political euphoria in Greece subsides as reality kicks in

Political euphoria in Greece subsides as reality kicks in

Enthusiasm over a change in Greece's government over the summer is showing the first signs of dipping amidst fresh challenges faced by the economy.

In the run-up to July elections, conservatives New Democracy had promised Greek voters jobs and tax relief after the crisis wiped out a quarter of the country's economy. Initial tax cuts have been delivered, in areas such as real estate, though more is being demanded from Prime Minister Kyriakos Mitsotakis who has pledged to reform the economy. The high bar set by New Democracy on its economic agenda has shortened the patience of austerity-weary Greeks who want results fast from the government.

A drop in the pre-election and post-election euphoria in Greece was expected, says think tank IOBE. Its economic sentiment index retreated in October to 106.7 units, from 107.2 units in September, dropping for a second straight month following a steady climb from April through to August.

"The extent to which the government implements commitments and economic policy priorities will largely determine whether economic sentiment will further improve or not," says IOBE. "On the side of businesses, an important condition to keep increasing employment and investments is the rationalizing of labor costs concerning taxes and social security, where changes are expected," it adds.

Greece's economy is forecast to expand by more than two percent this year, outperforming Europe, but the recovery is fragile. A slowdown in the global trade environment is weighing on Greek exports, while the country's banks are still limping along, carrying nearly 80 billion euros of bad loans left behind by the crisis. A plan being put together by the Finance Ministry to help lenders slash non-performing loans has been welcomed by the market but more will be needed to improve balance sheets and help lenders up credit pumped into the economy.

The feelgood feeling brought on by the change in government among consumers is also starting to recede. Supermarket sales, an important indicator of consumer demand, have weakened in recent months. Figures provided by IRL show that growth in supermarket revenues eased in the first nine months of the year to 2.5 percent from 3.4 percent in the January to June period.

To be sure though, the conservatives hit the ground running after coming into office and surprised many by the speed at which it implemented some decisions. Greece has also been actively chasing down large scale investments as it pushes through projects such as the Helliniko complex. Ambitious plans that take time to be felt on the streets of Athens.


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