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09/12/2016

Economists play down new Grexit fears

Euro & Finance

Economists play down new Grexit fears

Grexit fears have abated. But economists predict further troubles on the horizon for Alexis Tsipras' government.

[Juan Verni/Flickr]

Following Alexis Tsipras’ victory in the Greek general elections, the debate surrounding a potential exit from the Eurozone is not expected to rear its head for the time being. EurActiv Germany reports.

“A Grexit is still on the table,” said Commerzbank’s chief economist Jörg Krämer on Monday. “No matter who is in power, the room for manoeuvre is limited,” said Nordea’s European chief economist, Holger Sandte. “For the financial markets based outside of Greece, the whole matter is rather dull.”

>>Read: Tsipras storms to victory: ‘Europe will not be the same’

Thomas Gitzel, chief economist at VP Bank, suspects that in Brussels, the institutions breathed a sigh of relief, because, “the EU would prefer to seek reforms with Tsipras, rather than against Tsipras”.

Tsipras has had to grapple with Eurozone representatives over the terms of the third bailout deal and had hoped for post-election momentum. The Syriza leader had been under constant pressure to secure the much-needed €86 billion in aid to stave off state bankruptcy. His resignation after the package had been agreed upon also served to help expel opponents in his own ranks.

>>Read: Tsipras faces Syriza revolt

“The new Greek government will implement the reforms that have been agreed, but not as quickly as has been seen in the past years,” Krämer predicted. Conflicts with creditors are entirely expected. There is the possibility that the Greek crisis could come to the boil once again.

Creditor patience seems to know no limits though. “The financial markets know that and should as a result not be swayed by the upcoming skirmishes between Greece and the international community,” said Krämer.

His colleague at Nordea insisted that the reform programme agreed upon between Greece and her creditors must now be implemented. “The trickiest aspects of the deal include recapitalisation of the banks and debt relief, which will only be achieved if Greece moves forward with the reforms.”

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