Athens Digest 02.01.2019

• Tsipras sticks to October election pledge

• Next reshuffle could see major changes

• Tsakloglou warns of multiple recovery risks

# The Economist Intelligence Unit believes Prime Minister Tsipras won’t finish the term. Many analysts say the same. But snap elections is a decision made by the PM. And Tsipras himself, however, is adamant. “I’m looking for (election) dates in October,” he told reporters invited his New Year’s celebration. Local government elections are due on May 19 and 26, the run-off coinciding with Greece’s European Parliament vote. Polls show voters evenly split on whether the next general election should also be timed for those dates or considered independently.

# Government supporters hoping for a shake up in the Cabinet were disappointed last August, when most of the changes were made at the deputy level. But there is growing speculation of a broader government reshuffle in late January. PM Tsipras will have to replace Nasos Iliopoulos and Katerina Notopoulou as deputy ministers of labour and northern Greece, allowing them to run in mayoral races in Athens and Thessaloniki. That could coincide with the anticipated withdrawal of Defence Minister Kammenos and other members of his Independent Greeks party from the Cabinet over their disagreement on the Macedonia-name deal.

# A former senior government adviser _Greece;s representative ay the EWG_ has warned that hard-earned gains in the Greek economy could be put at risk during this election year. Panos Tsakloglou, a professor of economics at the Athens University of Economics and Business, says promises of increased spending on welfare and social programmes, the slow reduction of the non-performing loan stock, and a string of successful court challenges against bailout-era measures could rattle investors’ faith in the Greek recovery. He made the cautionary remarks in an article in the Athens daily Kathimerini, adding that problem could be compounded by international uncertainty, particularly over U.S. President Trump’s combative trade policy.

On our Radar: Gap to Gain?
The prime minister has promised to make the year 2019 one of “rebirth” for the Greek economy, despite the persisting difficulties facing the country: Meeting tough fiscal targets in an election year, addressing banking sector difficulties, and delivering growth amid renewed international uncertainty. Chris Allen, resident representative of the EU Commission’s Directorate General for Economic and Financial Affairs, argues the key challenge will be framing the country’s huge investment gap as an opportunity. He flagged the issue at a business conference in Thessaloniki back in mid-November, estimating that the annual gap was worth some EUR 15 billion, and citing the fast-broadband revolution as just one major opportunity the country has missed so far. Greek policymakers, he said, needed to redouble efforts to make the country more business friendly and focus public investment on stimulating private funding for major projects. Continued privatisation and reduction of banks’ NPLs, he said, were also priorities for 2019.