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Business responses are positive, Europe wants further steps

08 November 2010 / 18:11:38  GRReporter
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Commercial and industrial organizations welcomed the Prime Minister George Papandreou’s decision not to return to the voter polls. Athens Stock Exhange index rose, the spread fell, and Jean-Claude Juncker required further tightening of public finances.

The first elections round of mayors and district governors is over and the Prime Minister George Papandreou said he is pleased with the results and does not want new extraordinary parliamentary elections. The first positive signals from the business community in Greece followed his statement and the Athens Stock Exchange index reached 1549.35 points and grew by 2.76% as early as 10.45 am on Monday morning.

The threat of early parliamentary elections that was hanging over Greece in the last two weeks due to the Prime Minister’s statements made the international markets nervous. The spreads of the ten-year Greek government bonds grew over 900 points while the Athens Stock Exchange index fell below 1500 points.

On Friday, the interest rate on 10-year Greek government bonds against the relevant German bonds rose to 909 basis points and at one point it reached 927 basis points – the highest level since September 21, 2010. Today at noon, a day after the first round of the elections the Greek government bonds spreads to the German ones fell by 36 basis points and stayed at 887.8 points.

“The business circles are satisfied with the decision of the Prime Minister not to drag the country to early elections,” said in an open letter the president of the Athens Chamber of Commerce and Industry Kostadinos Mihalos. He explained that any new elections only a year after the last early parliamentary elections would cause serious problems to everyone in this very critical moment for the country. Mihalos stressed that the message of George Papandreou was not completely clear however and the Prime Minister should once again to explicitly rule out any early elections before the market stabilizes.  

The president of the Hellenic Chamber of Commerce Vassilis Korkidis also welcomed the promise of the Prime Minister and said: “The fact is that political uncertainty has always scared the business community even more than economic instability.” Korkidis said the possibility of returning to the voter polls again after October 4, 2010 would be very dangerous. He called them ‘express elections’ which could lead the country to anarchy and financial collapse. He interpreted the large voters’ outflow as a deliberate choice and criticized the political players on the Greek scene.

Greek analysts argue that the local elections results will give a vote of security to international markets. Moreover, they reflect people’s consent PASOK to conduct the economic reform set out in the Memorandum of financial support. The government will need this support to a great extent when the European statistical office Eurostat will announce on November 15 the final results for the value of the 2009 budget deficit. Its size will determine what additional measures will be necessarily taken until the end of the year to enable Greece to achieve the goals set out in the contract for financial support to receive the next tranche from the Euro zone countries and the International Monetary Fund.

It is expected the 2009 deficit to reach about 15.5 percent of GDP which will immediately form an additional gap in the budget of € 1.6 billion. This amount will be added to the already troubling two billion euros that the government is wondering how to collect by the year-end (less than a month and a half) to be able to fulfill its promises to the creditors of the IMF, the ECB and the EC. The representatives of the mission of the three institutions will come back the next week to check and make the last amendments in the 2011 draft budget. It will clarify exactly what changes will take place the next year so that Greece to be able to successfully reduce its deficit to only three percent by 2013.

Satisfied with the local elections results in Greece is the Eurogroup President Jean-Claude Juncker, who did recall that Greece should have to take additional measures to financially recover the public sector.

Tags: EconomyPoliticsEarly parliamentary electionsGreece
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