Amidst strong uncertainty in the international environment, the new government after the June 25 elections will be faced with critical economic challenges. Some of these issues will need to be dealt with immediately as there will be no grace period. Issues such as the draft budget of 2024 as well as the signing of the new loan agreement of 5 billion euros for REPowerEU should be finalized in the first quarter of the new government.
The acquisition of the investment grade also constitutes a national goal, although Greece has achieved the investment grade in market terms, according to financial advisors. The reduction in the yield and spread of Greek bonds demonstrates that Greek securities will soon be on the radar of large institutional investors.
The new Stability Pact
One of the most critical issues that the newly appointed Finance Minister will have to deal with is the new fiscal rules in the eurozone. The Commission submitted its legislative proposals for the revision of the Stability Pact at the end of April, although until now the EU Finance Ministers are in the process of exchanging views. Under these proposals, governments must ensure that the debt is reduced over 4 years and remains on a downward trajectory for a decade after that, without additional steps.
The proposal does not set a specific target for the reduction of the debt and requires separate negotiation with each member state. The debt reduction will be the result of a four-year plan of reforms, investment and fiscal measures, to be agreed separately by the Commission and each government.As for the deficit, it should remain below 3% of GDP.
The two budgets
Another one of the first issues that the new financial staff will have to face is the smooth execution of this year’s state budget and the preparation of the draft budget for 2024, which should be submitted to Parliament on the first Monday of October.
The revision of the Recovery Plan
The implementation of the Greek Recovery Plan is moving so far at a particularly satisfactory rate, given that Greece is the third country in a row that has submitted a request for the payment of the third tranche. Nevertheless, the new government that will emerge from the June 25 elections, both this year and in 2024, will have to “close” a series of landmark projects related to the areas of energy conservation, railways, digitization in various sectors but also the modernization of justice.
