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In its weekly analysis, Alpha Bank recommends that first, the new government should avail sufficient time to carry out its mission without being pressured by demands for parliamentary elections.

The new government of Prime Minister Lucas Papademos, who has gained the full confidence of the Greek society, should immediately address the following areas:

a) send a clear and strong message to the international partners that there is political stability in Greece and a government that is able to act firmly and take all necessary steps for the country to emerge from the crisis, and political will for the timely and full recovery of economic independence;

b) firmly declare its unwavering commitment to implementing the measures necessary to achieve the objectives of the austerity programme for 2011-2015. In 2010-2011, Greece has already achieved impressive fiscal adjustment by introducing and implementing significant measures to increase income and reduce government spending. The result of this is a primary surplus of 1.5% of GDP in 2012 from a deficit of 10.8% of GDP in 2009;

Also, the country has made substantial progress in the programme by carrying out extensive and fundamental structural reforms (especially in the health care system and social security, labour market, state enterprises structure and local governments). All this combined with privatization provides for improved international competitiveness and increase in the growth potential of the country's economy and balance in its medium- and long-term fiscal prospects.

The new government will have to try to change the negative attitude towards the country and to proceed as soon as possible to ensure the necessary conditions for the payment of the sixth bailout tranche from May 2010, amounting to € 110 billion. The payment of this tranche depends on the measures of financial policy, which Greece has already implemented and applied, and on the fiscal adjustment and reforms already implemented, as indicated in the Troika’s report on Greece.

This tranche would have been granted already if political instability had not occurred in the country last week. Therefore, the sixth tranche might be paid by the end of November, provided that the new government and the parties supporting it would unconditionally undertake to fully implement the agreement of 27 October, 2011.

Also, the new government should proceed with the effective implementation of the 2011 budget. It is necessary to ensure the smooth functioning of public services in the last two months of the year in order to collect planned revenue in the most effective way. It is evident that the pace of rationalization of the central administration functioning and state enterprises structure needs to be accelerated. National efforts to end the crisis affect not only the political system, but also public administration and the private sector.

In addition, the government should submit to the National Assembly the final draft budget for 2012 by 21 November 2011 so that the Parliament can vote on it by 23 December 2011. It is noted that the measures to increase revenues and reduce public spending, which provide for the implementation of the programme for 2011 and 2012, have been introduced already and are implemented. What is needed now is to ensure their effective implementation.

Moreover, it is essential that the new government reach an agreement with the Troika on the revised medium-term fiscal strategy framework for 2011-2015, which is actually a new Memorandum of economic policy. In view of this, the government should: (1) prepare the new tax bill and submit it to Parliament to vote on it, (2) take on privatization more intensively and effectively, by fully using the new organizational and institutional frameworks that are already operating, and (3) identify additional measures necessary to fully realize the medium-term fiscal strategy framework for 2013 -2014, as already adopted by the Troika in its report of October 2011.

The 2011-2015 medium-term framework should be revised by the end of December 2011 and the new Memorandum should be established in order to be voted by Parliament in January 2012. Most important, however, is the designation and implementation of measures to ensure economic recovery from 2012 based on restoring investor confidence in the Greek economy, the use of an already dynamic growth of exports and tourism, and public investment, coupled with privatization. Returning the economy to satisfactory rates of growth in 2013 could contribute significantly to the required fiscal adjustment.

Finally, procedures and negotiations with banks holding Greek government bonds should be initiated immediately to support the bonds value reducing programme by 50% (PSI+), which is the major part of the second bailout package to Greece voted on 26 October 2011. The Greek government committed at the meeting of Eurogroup on 7 November 2011 to fully implement these conditions.

Funding from the European Financial Stability Facility is expected to start by the end of January 2012 as well as the haircut on the bonds (PSI) under the second bailout package. Provided that the new loan agreement between Greece and the European Financial Stability Facility is voted by Parliament, Greece will receive € 30 billion to recapitalize banks and another € 30 billion that will be used as tools to enhance lending and facilitate the debt haircut (PSI+) for private investors. Furthermore, in February 2012, Greece should receive an additional € 20 billion from the European Financial Stability Facility (the 1st tranche of the new loan) to cover state obligations to third parties.