Greece’s Prime Minister Kyriakos Mitsotakis has secured a decisive victory in the country’s general election, providing him with a strong mandate for the next four years. This resounding mandate assures markets that he will be able to implement investor-friendly policies, as well as put into practice big reforms and changes to improve the country’s economy.
Mitsotakis’ conservative New Democracy party gained 40.6% of the vote, translating to 158 seats out of 300 in the parliament. This will enable him to form a single-party government without the assistance of any other parties. Following the election, the Athens Stock Exchange General Index rose by over 36% and yields on Greek 10-year bonds fell by five basis points on Monday, to a new low since August.
During the pre-election period, Mitsotakis campaigned on the basis of Greece’s economic transformation over the last few years, including its GDP recovery to a level close to that of 2010 before its debt crisis. In addition to this, unemployment is now half its peak of 28%, and stocks and bonds are at a high level.
Mitsotakis promised that he would use his strong mandate to make significant changes. One of his priorities will be to increase wages in the public sector and improve the economy to boost salaries in the private sector. He also made promises to upgrade the healthcare system and to increase the speed of court cases.
However, Mitsotakis will face a couple of challenges as he takes on his new role. Firstly, he will need to improve Greece’s junk-level credit rating, which it received in 2008 during the global financial crisis. Ratings agencies are scheduled to update their assessments on the economy in the second half of the year, and credit-rating experts from banks like Eurobank suggest that structural reforms are essential for Greece to increase investment and growth and avoid external imbalances.
Moreover, Mitsotakis will need to address Greece's current account deficit that increased to 9.6% of GDP in 2022 due to an energy price shock from 5.5% the year before. Fighting tax evasion will be another priority, as Greeks are said to be declaring incomes of €80bn ($87.1bn), while consumption level stands at €140bn. Raising the minimum wage and average monthly income in the private sector will be another challenge that Mitsotakis has pledged to address, by attracting more investment into the country that will create better and well-paying jobs.
In conclusion, Mitsotakis now has a strong mandate to transform Greece's economy, and he will need to focus on implementing necessary changes to achieve sustainable growth and improve the country's credit rating. Despite the successes of his campaign, the far-right parties now in parliament may attempt to cause disruption by broadcasting a populist message or exploiting controversial issues like migration, abortion, and Russia sanctions, which could harm Mitsotakis's plans.