Political uncertainty threatens the stock market and the real economy

Regardless of the fact that date of parliamentarians elections That the Prime Minister made the announcement on Tuesday should not have surprised any of us, it is a fact that was noted immediately afterwards He increases to sales In most shares on the Athens Stock Exchange.

Without any negative reason from international marketsObviously, investors felt a little numb as the countdown to the election contest or contests officially began. Inevitably minds of investors as well as concerned citizens actively On issues of the economy and the stock market, it goes into the consequences that might have for the Greek economy and business, and thus for the stock market.

the suspicion We can say that it is multi-layer. Unlike a month ago, predicting the outcome of elections is now much more difficult. More difficult is any weather forecast With regard to the composition of the government that will emerge after the end of the electoral contest or, more precisely, the electoral contests.

the Re-election with the current government parliamentary Self-reliance is the outcome apparently preferred by the majority of investors, both domestic and international. This possibility, which until recently was a high probability of its occurrence, is now considered less likely. Given that no govt coalition The current economic policy is likely to change in many places, it is clear that the level of investor concern has risen a lot.

the reflection It is also intensified by the fact that between now and a possible second election Confrontation (At the moment it does not seem particularly likely that the government will be formed after the May 21 elections.) At least three months have passed. As if that weren’t enough, there are also scenarios The need for a third election. these scenarios They are not very likely but they are sure to spook investors even more.

So we have the main Factor Uncertainty, who will be the government that will take over the country after the elections, but we also have the other factor, which is the duration of this process. Three months is a long time and there are sure to be several occasions scare Or it will satisfy investors and the market.

However, all this time, their minds will go to the risks to the country’s economy, Greek companies and Athens Stock Exchange Depending on the possible results of the elections and the duration of the overall electoral process. The risks can be both short and long term.

Starting from the short term, we can easily identify the first reason: the possible delay in upgrading the country’s credit rating and our return to “investment grade”. When this upgrade comes, it will help the Greek economy as it will likely contribute to reducing borrowing costs in the country. For the same reason, the cost of borrowing for Greek companies will be lowered, while opening the way for the arrival of new institutional investors for Greek bonds and stocks.

The longer the upgrade is delayed the worse. At the moment, there seem to be many concerns among investors and analysts, who expect that rating agencies will be reluctant to go ahead with this step before the political landscape in the country becomes clear.

They don’t seem to include those at Goldman Sachs, who released a report yesterday arguing there’s a high chance we’ll see an upgrade before the May 21st election. The extent of market concern about this issue was demonstrated by the bullish reaction on the Athens Stock Exchange once the report was made public.

The second issue, again of a short-term nature, which is of interest to analysts and investors and is mainly related to the duration of the electoral competitions, is the possible delay in the completion of public tenders for major projects or in the completion of others. which is in an advanced stage. It is clear that if such delays occur there will be multiple negative consequences.

For the country, important and necessary projects will be delayed, for construction companies as their turnover will be affected and for the economy in general because these projects stimulate many business sectors and create job opportunities. Also, we must not forget that investments made with the support of the European Recovery Fund have narrow time margins and a possible long delay may cause our country to lose valuable funds.

The process of gradually withdrawing the Greek public from the equity capital of large systemic banks will almost certainly also be delayed. In such a situation, collecting large sums of money from the public will be delayed, as well as completely separating banks from political power, which is necessary to attract quality institutional investors. Obviously, this potential delay will be negative for the climate on the Athens Stock Exchange and for the UAE itself.

Another issue related to the duration of the electoral competitions is the possible delay in the completion of major trade agreements involving Greek companies, and their completion will be a catalyst for the business climate in the country, the companies themselves, and of course for the Athens Stock Exchange in the case of listed companies.

The concern, which is of a long-term nature and is directly related to the final outcome of the electoral process and the identity and program of the new government, is clearly related to the economic policy that will be pursued. Investors may prefer the continuation of the same economic policy with an independent re-election of the current government. But since that seems relatively unlikely based on the polls released so far, it makes sense for investors to be concerned about the possibility of a policy change.

In particular, they do not see at all positively the possibility of increasing tax rates on the incomes of natural and legal persons. Domestic investors certainly won’t want to see an increase in dividend tax rates. Any increase in burdens on asset transfers and/or imposition of new burdens on real estate will also have a negative impact.

For now, these concerns seem more murky because detailed pre-election platforms for opposition parties that could participate in a future government have yet to be announced. As we head into the election, it remains to be seen if these fears will become more real. Tax increases are rarely good for the stock market, and something similar usually happens in the economy.

The most realistic and least hypothetical fear, as it is based on actual statements of the leadership of the opposition parties, is that a future government will take measures to increase its influence over the management of companies in which the public has a significant share but in this. The period governed by special economic criteria. Obviously, such a prospect would be extremely negative for the companies themselves and the stock market. But it will be very negative for the country and the economy, as the experience of the past teaches us.

As we said at the beginning, we have a period of no less than three months until the political situation becomes clear, assuming that there is a need to run electoral rivals. As the days go by, we will begin to understand whether the concerns about the economy and the stock market mentioned earlier are justified or not, and we will hear the results of opinion polls and the details of the party platforms. The “redder” the general index of the Athens Stock Exchange, the more solid it appears.