Greece has voted

Voters in Greece voted clearly in favour of a change of government on Sunday. After four years under Prime Minister Tsipras of the left-wing populist party Syriza, the conservatives of Kyriakos Mitsotakis emerged as clear winners. With counting almost complete, Mitsotakis’ Nea Dimokratia (ND) has gained 39.85% with 31.53% for Syriza. Including the bonus of 50 seats for the strongest party, ND can be assured of an absolute majority in the Greek parliament with 158 of a total 300 seats. Syriza will have 86. Four other parties will also have seats, they are: KINAL (22 seats, social-democratic), the Communist Party (15 seats), Ellinki (10 seats, right-wing conservative) as well as the party founded by the former finance minister Yannis Varoufakis, MeRA25 (9 seats, left-alternative). The right-wing extremist party „Golden Dawn“ failed at the 3% hurdle and will therefore not be represented in the Greek parliament. The party had previously held 18 seats.

With ND’s leader, Kyriakos Mitsotakis, a representative of the „old guard“ returns to the top of the Greek government. His father was Prime Minister of Greece at the beginning of the nineties. Mitsotakis is considered an economic liberal. ND’s manifesto includes, amongst other things, increased privatisation and tax cuts. In order to gain more leeway for the latter, Mitsotakis would probably also require concessions from the Commission and the Eurogroup. Although Greece concluded the ESM programme in June 2018, various obligations remain. For instance, over the next few years, Athens will continue to generate high primary surpluses of up to 3.5% in order to reduce its exorbitant debt.

In our current forecast for Greece, we expect growth to slow to 1.2 percent this year, after just under two percent in the previous year. At 1.3 percent, the Greek economy is unlikely to grow faster in 2020. If Mitsotakis succeeds in wringing concessions from the EU and implementing his election campaign announcements, private consumption and economic growth could be somewhat stronger next year. However, the planned tax cuts will make it difficult for the government to continue to achieve the primary budget surpluses required by the EU.

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