Greek general election: Economist warns of ‘poisonous uncertainty’ as vote looms
WITH Greek Prime Minister Alexis Tsipras’s Syriza tipped to lose Sunday’s general election to the centre-right New Democracy party, an economist has warned whoever emerges victorious will inherit a situation of “looming uncertainty” with high levels of unemployment and national debt.
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Recent polls have suggested Kyriakos Mitsotakis’s New Democracy party is on course to take between 38 and 39 percent of the vote - a result which would leave them close to an overall majority. By contrast, Mr Tsipras’s party, Syriza is struggling to break the 30 percent mark. Syriza won the 2015 election with Greece struggling to implement stringent economic reforms and austerity measures, and burdened by debt as a result of being forced to sign up for more than €260billion in rescue funds from eurozone partners and the International Monetary Fund (IMF).
Uncertainty is poisonous for long-term investment
Reto Foellmi, an economist at the University of St Gallen in Switzerland, told Express.co.uk: “The main problem for investors, and high-skilled workforce, is the looming uncertainty in Greece.
“Uncertainty is poisonous for long-term investment.
“My policy recommendation is relatively simple therefore.
“The new government needs to announce economic policies that are both reliable and credible.
“This could be a combination of modest tax cuts, a smaller relaunch of privatisations and at least a pledge to simplify the tax code and red tape.”
Sweeping measures such as big tax cuts or subsidies were not credible because they would simply lead to more debt and hurt fiscal stability, Mr Foellmi said, with investors having no confidence that such mesures would last.
He added: “Given the extreme decline in GDP, the recovery of the Greek economy has been very slow.
“Unemployment went down from 24 percent to 18 percent, which is still high.
“Ongoing high emigration of talented people and a low investment to GDP rate of 11 percent show little confidence in the economic future and the idiosyncratic economic policies of the Syriza government.”
However, he said: “The disappointing figures provide a chance for a new government, however: there is a lot of unused potential.
“Sound, credible economic policies could help to restore investor’s confidence, at a time where the tourism sector is doing well.
“If a new Greek government manages to establish a solid track record along these dimensions, a better deal for serving the very high debt load could be a potential bonus.”
Despite being elected on a platform of reversing austerity four years ago, Mr Tsipras submitted to a bailout - his country’s third in recent years - months later, with German Chancellor Angela Merkel seen as having instrumental in imposing such measures.
During a visit to Greece earlier this year, Mrs Merkel said Greece needed to continue pushing ahead with economic reforms in order to insulate itself from more upheaval.
She explained: “I’m particularly happy to see that the situation has changed so much, unemployment has fallen.
“Of course it is not the end of a period of reforms, but the beginning of a new situation.”