Greece: Transitioning the Economy and Sustaining Growth Outperformance

Mitsotakis has managed to get a second consecutive mandate

It took two election rounds for Prime Minister Kyriakos Mitsotakis, the leader of New Democracy, to obtain a second mandate. In the first round, held on 25 May, he came first but could not obtain an absolute majority due to the proportional system, deprived of the majority bonus. As it was already known that the next election would be held with a different system, reintroducing a majority bonus, outgoing PM Mitsotakis abstained from seeking any form of coalition and focused on the new election which was held on 25 June.

The different system did the trick. ND broadly replicated the result of May’s vote, but this time round – thanks to the bonus – this was enough to obtain 158 seats out of a required majority of 151. Mitsotakis was again given the mandate to form a government which has assured him another four years in power.

Confronted by a very poor result which saw the number of votes almost halve from the 2016 election result, Alexis Tsipras, the leader of the main opposition party Syriza, resigned.

Two oppositions

The June election added a new feature to the Greek political scene: three small parties on the right of New Democracy managed to pass the 3% hurdle, obtaining parliamentary representation. This means Mitsotakis will now have to confront two oppositions: one on the left, which will likely need some time to reorganise after the heavy defeat of Syriza, and one on the right, which might prove to be more insidious in its desire for visibility. It will be interesting to see whether pressure from the right will impact the policy line of the government any time soon.

Economy is still enjoying post-pandemic re-opening inertia

The Greek economy has benefited from the post-pandemic period of prolonged re-opening effects and the related demand for tourism services. The tourism catch-up still seems to be in place. Year-to-date, the number of arrivals has already reached above the levels of 2019 over the same period.

The economic rebound in 2022 brought about improvements in the labour market which still continue to this day. In May, the unemployment rate fell below 11% for the first time since late 2009. Employment gains – helped by cooling inflation – have continued to propel disposable income, ultimately supporting consumption.

 

Tourist arrivals back above pre-Covid levels (January-May)

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