Government banking on debt upgrade

Fresh from a tense clash in Parliament with opposition leader Alexis Tsipras over revelations of widespread wiretapping, Prime Minister Kyriakos Mitsotakis is counting on the economy, including a possible upgrade of Greece’s debt to investment grade early next year, to help him in the runup to a likely double election in a few months’ time.

Mitsotakis will use next week’s debate on the 2023 budget to announce new support measures to mitigate the effects of inflation on households and businesses alike. He is also planning a couple of bills, on housing loans on favorable terms and on palliative care, targeting the young and the elderly respectively, and wants to conclude new deals to acquire armaments.

Until recently, government officials were pretty certain that achieving investment grade for the country’s debt for the first time since 2010 would not happen ahead of the elections. Now, the prime minister and his close aides are hinting at a “nice surprise” that, besides boosting Mitsotakis’ credentials as a sound manager of the economy, will also lessen the burden of servicing the country’s still enormous debt.

Government officials hope that the return to primary budget surpluses in 2023, the reduction in the country’s overall debt burden and the prospect of a second consecutive year of above-average growth, compared with other European Union members, will move the major credit rating agencies to bestow the coveted investment grade on Greece ahead of schedule. Greek officials greatly appreciated a recent statement by Irish Finance Minister and Eurogroup President Paschal Donohoe that “Greece deserves investment grade.”

Achieving investment grade is one of several uncertainties ruling New Democracy faces in the runup to elections. The wiretappings affair, while seemingly ranking below other issues in voters’ concerns, still has the potential to erode the government’s image. Mitsotakis and his aides say that it is now up to justice to investigate.

Relations with Turkey are another unknown factor. Still, the government believes that, despite his rhetorical flourishes and threats of Turkey “coming suddenly one night,” Turkish President Recep Tayyip Erdogan has been very cautious in practice. But, with him facing a difficult re-election campaign next year, officials are wary of a possible incident designed to boost Erdogan’s standing with his electorate.