Limited room for significant deviations from current policies
With the first crucial parliamentary vote for the election of the new President of the Hellenic Republic expected to take place later today, we provide some analysis on the main stumbling blocks that have so far prevented an agreement with official lenders for the completion of the present program review. In addition, we take a closer look at the future evolution of the general government borrowing needs, we analyze the potential size and structure of a post-program precautionary credit facility and emphasize the need for a new package of debt relief measures (OSI) so as to further reduce the net present value of public debt and smooth out a pretty demanding borrowing requirement profile post 2022/23. All in all, our analysis suggests that there is extremely limited room for major deviations from present fiscal targets as that would severely undermine the government’s cash position and instigate a sharp increase in borrowing needs going forward. As regards the present structural reforms agenda, we note the significant progress made thus far in modernizing the public sector and improving the institutional framework and the domestic business environment. Yet, a range of relevant indicators suggests that the said progress has so far been broadly uneven, while additional efforts are needed to reach the critical mass of reforms that could boost investment activity and improve export performance.
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