economy

In particular, as noted by Goldman Sachs, according to capital.gr, the Greek Prime Minister announced on Tuesday that the parliamentary elections will be held on May 21. This decision comes after weeks of political unrest, following a major train crash on the night of February 28. Current polls show a narrow lead for the prime minister's party (New Democracy) over the country's second-largest party (SYRIZA), which could make a runoff in early July more likely.

While the May election is set to take place under a proportional representation system, the system for the run-off election in July will reinstate the majority bonus. Based on recent opinion polls, the first-round elections seem unlikely to yield a definitive result, raising the possibility of a second round and a coalition government, led by New Democracy and dependent on the support of the socialist party (PASOK - KINAL).

Meanwhile, the Greek economy appears well positioned for an improved outlook and possibly an upgrade to investment grade from S&P on April 21, Goldman Sachs estimates. Greece remains relatively resilient, he points out, thanks to an increase in private credit to the real economy, showing a clear rise in 2022 after 10 years of contraction. Credit growth supported the last phase of the investment recovery (+14.7% in 2022). Then, as Goldman estimates, investment growth could also benefit from the support of the Recovery Fund which, in the case of Greece, amounts to around 17% of GDP and extends until 2026. While the latest European financial tensions are challenge to this constructive growth outlook, the Greek economy remains on solid footing, in the view of the American bank

"Unless recent European financial tensions worsen beyond our expectations, Greece remains relatively resilient, thanks to positive private credit growth, a continued recovery in capital formation and an improvement in its declining debt-to-GDP ratio." even amid rising debt costs," he notes.

Finally, he says, even though the ECB's tightening cycle is fueling higher yields and the cost of public debt is set to rise more generally in the coming years, Greek debt is less vulnerable than other countries. This is due to two main reasons. The first is the extended weighted duration of the Greek debt (17.5 years), thanks to the European financial assistance packages (EFSF, ESM, EIB, SURE and NGEU). The second is increased nominal growth, expected to remain around 4% until 2024, and a cautious fiscal outlook where the primary balance will continue to expand in 2023 and 2024.

According to Goldman's estimates, these macroeconomic conditions support a steady decline in Greek debt-to-GDP.