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Despite recent debt relief measures, credit rating upgrades and future post-programme quarterly monitoring, there is still a case for caution for investors in Greece. This is mirrored in the almost record low trading activity on the Athens Stock Exchange; it is obvious that investment fatigue permeates the expectation of a long-awaited return to normality in the Greek real economy.

The key catalyst for improvement in the real economy relates to the much-needed relaxation of current over-taxation that both the Greek government and main opposition party have vowed to implement, with the consent of the country’s creditors. The Finance Ministry is reportedly working to deliver a set of proposals to Prime Minister Alexis Tsipras by end July detailing €700mn tax cuts to be implemented next year, with policy options including reductions to the ENFIA property tax, income tax and social security contributions. With tax revenues representing 38.6% of GDP, according to the most recent 2017 report by OECD, Greece is ranked within the top 10 most overtaxed countries globally. At the same time, a further concern is that in terms of taxes on goods and services, Greece is ranked second globally, which we feel creates a difficult environment for local consumption and for the economy in general to flourish.

In the absence of fast growth in the local economy, foreign investors are focusing more and more on Greek government bonds. This comes ahead of further expected credit rating upgrades and a possible inclusion in the European Central Bank’s (ECB) quantitative easing programme (during the small window that exists between now and the end of Greece’s third bailout programme), post a positive debt sustainability analysis by ECB. Furthermore, we note record levels of interest in commercial real estate opportunities in the country and a growing interest in export-oriented companies, which after historically slow growth is expanding rapidly in private equity opportunities.

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(Reporting by Petros Mylonas, Head of Southern Europe)