Greece's New Democracy Party Secures Absolute Majority, Confronts Geopolitical and Economic Tests
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Challenges lie ahead on both the geopolitical and economic front
Having obtained an absolute majority, Mitsotakis will very likely announce that he will not seek any form of coalition. In his second four-year mandate, Mitsotakis will soon have to confront non-trivial challenges, both on the geopolitical and the economic front.
On the first, the search for some normalisation of bilateral relations with Turkey (where elections were held in May) will likely be a top priority. On the economic front, he will have to try to meet electoral promises (wage and pension increases) in a changing external environment, where the availability of resources will likely be constrained by the reinstallation of budgetary rules. The implicit call for (and support of) continuity from voters might not be easy to satisfy. To be sure, some support might come from the economic impact of a possible rating upgrade (Greece is still sub-investment grade) but, for this to materialise, the reform plan, delayed over the recent crisis years, will have to be revitalised.
Greek economy set to remain an outperformer within the eurozone, for now
In the short run, the Greek economy will not be immune to the impact of rising interest rates on domestic demand, but a resilient labour market and positive tourism inflows should help the country post positive, if unspectacular, quarterly growth rates over the second and third quarters. If this is the case, Greece is likely to be confirmed, at least temporarily, as an economic outperformer among countries in the eurozone.
