The German banking giant Deutsche Bank has expressed optimism about a Greek return to the markets and the prospects for the economy in a 12-page report entiled ‘’Greece in 2018, finally some light at the end of the tunnel΄’.
The report says that after eight years of crisis, the management of Greece’s return to the markets will be crucial for the country’s future and that of the eurozone.
The analyst notes that for the first time in a long time Greece and its creditors are on the same wavelength, which makes a cooperative Greek exit from the ESM programme, in August, 2018, the basic scenario, although it is unclear whether this will be with a security credit line from the ESM, which the government appears to want to avoid for now.
Bailout exit scenarios, continuity in reforms
That scenario, without a safety credit line, envisions a reduced role for the IMF, with a limited, gradual debt relief that will be contingent upon implementation of agreed reforms and slightly looser fiscal constraints than at present.
The crucial condition for the projected happy but difficult ending and new start are the avoidance of fiscal and reform back-pedaling, the clean-up of the banking system and the gradual resolution of billions of euros in non-performing loans, and the easing of capital controls.
Another key condition, according to the report, is political stability and stable fiscal policies that will solidify consumer and business trust.
The report even touches on the adoption of a directly proportional electoral system that the government is planning to legislate, which will require the development of cooperation among parties in a coalition.
Long, hard road ahead
While concluding that the prospects are positive, the analyst underlines that the road to normalisation will be long and hard.
That includes a clear understanding and definition of the post-memorandum Greece-EU economic relationship, but without the necessity of a back-up credit line, as Greece’s borrowing needs in the coming years are limited.
The bank analyst believes that Prime Minister Alexis Tsipras may call snap elections in the last quarter of 2018, soon after the current bailout programme ends, so as to capitalise politically on the successful exit.
The report even suggests that Tsipras can tout the end of the dread troika of creditors and the idea that Greece is taking its fate into its own hands as the main plank of his campaign platform.