A new market test lies ahead for Greece as it prepares its 2019 budget

A woman walks past a graffiti refering to the Greek debt and reading 'Forever a loan' outside the Academy of Athens building on August 28, 2017.

Louisa Gouliamaki | AFP | Getty Images

A woman walks past a graffiti refering to the Greek debt and reading ‘Forever a loan’ outside the Academy of Athens building on August 28, 2017.

Market players will be looking for clues as to Greece’s economic plans when Athens unveil its draft budget for 2019 later Monday.

The budget is the country’s first in nearly a decade without being subject to a bailout program.

Greece ended a third financial rescue in August and has vowed to stick to stringent fiscal targets in the coming years in exchange for some debt relief. Athens also legislated reforms, including the country’s pension system, under that third bailout that are due to take effect in the coming years.

Markets are anxious to find out whether Prime Minister Alexis Tsipras’ government will stick to these targets, or if it will challenge them ahead of a general election in 2019.

“The Greek government is under huge pressure to allow for some fiscal easing as it tries to catch up in polls before the elections in 2019,” Ricardo Garcia, chief euro zone economist at UBS, told CNBC via email Monday.

The center-right and opposition party New Democracy has been leading opinion polls against the ruling anti-establishment party Syriza. In the latest poll, conducted on behalf of the Proto Thema newspaper, showed last month a 10.9 percent difference between the two parties.

“In addition, New Democracy is increasing pressure in advance of the elections by promising fiscal easing themselves. If Syriza isn’t able to deliver fiscal easing before the elections, New Democracy’s promises will look more credible,” Garcia added.

Media reports have suggested that, since August, Tsipras is looking to cancel or postpone planned cuts in pensions, scheduled to start in January. The Greek government was not immediately available for comment when contacted by CNBC.

Nonetheless, potential changes to pensions, or to other reforms, could spark confrontations with European institutions and the International Monetary Fund (IMF). The IMF said last month that the 2019 pension cuts are part of the reforms that the Greek government agreed to, and that Greece needs to show it is investor-friendly.

Source link

About the Author

Leave A Response