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Greece Politics June 2023

Greece: Old government with New Democracy: Mitsotakis wins again

New Democracy obtained an absolute majority in snap elections.

Kyriakos Mitsotakis will serve as Prime Minister again.

Greece will maintain its current economic policy approach.

What happened: On 25 June, the ruling right-wing party New Democracy (ND) obtained an absolute parliamentary majority in snap elections. In a first round of elections on 21 May, ND secured a landslide victory but fell short of achieving an absolute majority and decided to head for second elections rather than form a coalition government. Since the May elections, Ioannis Sarmas has been serving as caretaker prime minister.

In June, New Democracy received a similar share of votes as in May. However, the winner received a 50-seat majority bonus—a rule that has been in place since 1990 in various formats but was paused for May’s elections. Consequently, ND obtained a parliamentary majority, and Kyriakos Mitsotakis will be Prime Minister again.

The economic impact: The new government should maintain economic policy continuity. Namely, it will remain committed to the ongoing fiscal consolidation process through prudent spending while trying to lower taxes. Stronger fundamentals and economic resilience have led to several credit rating upgrades by Fitch, Moody’s and S&P in recent years. Additionally, the new government will maintain a pro-business stance, which is likely to attract substantial inflows of foreign investment. Regarding international relations, Greece will remain on good terms with the EU, which will boost the country’s economic prospects in turn.

Analysts at the EIU commented on the hurdles facing the next government:

“The policy challenges facing the next government are considerable given that we expect interest rates to rise further and the effects of the cost-of-living and energy crises to persist. The next government must also address the infrastructure problems highlighted by the disastrous Tempi train crash in February, accelerate implementation of the reforms contained in Greece’s EU-backed national recovery and resilience plan, and tighten fiscal policy to reduce the country’s high level of public debt, which has been declining as a share of GDP but rising in nominal terms.”

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