Over the past 3 years, there was an escalated uncertainty over Greece’s fiscal consolidation, then funding needs and ultimately debt sustainability. During last elections, the previously simmering disagreement and social anger over the imposed austerity measures was transformed into a protest ”negative” vote for the country’s leading political parties. The outcome of national elections led to a fragile coalition government, for the first time in recent history, with the main mandate to keep Greece in the eurozone, an issue that had never been questioned in the past.
International lenders as well as the leaders of New Democracy and PASOK view the upcoming votes in the parliament as an answer to the question of whether Greece should remain part of the eurozone or not, something like an indirect referendum. The rationale in the previous votes referred mainly to whether the present government would be able to overcome the ongoing crisis. Now having a pro-European coalition government, the question is not particularly on persons or policies, but rather on a much bigger issue: the country’s position in the map of Europe.
Latest press reports indicate that both bills, namely implementation law of 2013-16 Medium-Term Fiscal Strategy and 2013 budget, will be passed with 152-157 votes in the 300-seat parliament. Positive votes are expected from all MPs of the ruling party (New Democracy), the majority of PASOK lawmakers, while the junior coalition party (Democratic Left) decided yesterday to vote ‘present’ on the omnibus bill, due to its opposition to labor changes, on November 7 and ‘in favour’ on the budget on November 11.
One of the first steps after the emerging approval of the disbursement of the next tranche of €31.5bn should be the clarification and launch of the long-awaited Greek bank recapitalization. Although this will not lead to a direct liquidity boost in the economy, it will help restore some of their lost confidence in the markets, which is a key prerequisite ahead of any positive development in the real economy. Implementation of privatizations will also send a positive signal to markets and investors.
But perhaps the clearest message would be to eliminate Grexit scenarios and restore depositors’ and investors’ confidence to the prospects of the Greek economy. In other words, the approval of the disbursement should be the first in a series of steps, which would involve clear commitment and support by international lenders on key ‘external’ issues and restoring growth and confidence domestically along with the required political stability.
Summing up, there is a serious and probably the last chance for a rebound of the Greek economy. The market is desperately seeking liquidity, improving sentiment and better economic prospects. A positive vote could potentially lead to this direction.