After falling into recession as the 2008 financial crisis hit, Greece’s economy has finally expanded by 1.7% in Q3 in 2014, compared to the same quarter last year , and also Greece has benefited from a highly successful tourism season. After six years of trauma following a rescue from near bankruptcy and drastic economics restructuring, Greece economy is set to return to growth this year.
However, umemployment rate is still high and inflation is still getting very low. Greece is still suffering from large budget deficit and capital flows, so the government will still need to borrow money in order to pay the police and the pensions.
Greek Parliament failed to appoint a new president in december in 2014 and had to face snap election. This caused the Greek stocks fell as much as %11 in the new year while Greek bond yields jumped above 9 percent. Investors sold off Greek government bonds, pushing bond yields above 9%. The government’s borrowing costs on 10-year bonds rose to 9,7%, in a reminder of the 2010 crisis when 10-year bonds soared above 11%.
These elections will be a struggle between fear for Euro exit and anger against austerity.The left-wing Syriza party program includes not paying the debt greece owes to European countries. Syriza’s leader has promised to raise incomes, reduce taxation and reverse privatizations. He wants to replace the term ‘debt default’ with ‘debt renegotiation’ and Syriza’s government aim is to exit the bailout without new austerity measure.
Samaras government, the leader of a small centre-left party, wants to restore political stability, the minumum wage to its pre-crisis level, provide free electricty and food to destitute families, and to reduce unemployment by hiring moore civil servants. Samaras’s promises may be financed by austerity measures this time, even if previous experiences not showing it, there is always hope. However, it is unclear how a syriza government will finance such expansive policies without austerity measures if his party wins.It seems to me that there will be high political risk for greece in 2015 and will increase the risks to Greece’s creditworthiness.
According to analysts, there is an increasing probability that Greece will default on its debt, leave the eurozone and devalue the new drachma in 2015.I think that nothing will change except unresolved default on debt for Greece in 2015, whatever the result of elections, it is certain that Greece should continue to reform its finances rather than ending austerity measures, try to build stability its public finances and not to leave the Euro.
Otherwise, if greece leaves the eurozone, it will lead to chaos and has difficulty times in the long run. It seems to me that Greece is alone in EU and should solve his problem on his own.