This Sunday, June 17th marks a turning point for the global economy. After an inconclusive election on May 4th, Greeks will take to the polls to decide the fate of their country and quite possibly the future of the euro.
For months, stocks have surged and slumped over speculation surrounding Greece and the euro. More than 80% of Greeks want to remain in the euro, yet over the past month the Syriza Party, a radical-left coalition adamantly opposed to bailouts, has grown in popularity as voters voice their frustration with a 23% unemployment rate, a bankrupt country, and crippling austerity.
Greece’s upcoming election will affect global markets in a big way, but the details can be confusing. Here’s a rundown of the major players involved, the issues at hand, and the implications for the euro’s future:
- New Democratic Party led by Antonis Samaras. Center-right political party supporting bailout commitments with the EU-IMF.
What he says he’ll do: Samaras has said that he will amend the bailout deal so new jobs could be created. Ultimately, spending cuts will continue and not much will change.
What you should be concerned about: Greeks have faced painful austerity measures, rising unemployment and chaos in the streets over the past few years. Samaras is not offering any substantial change to Greece’s problems, and his only appeal seems to be that his election will keep Greece in the euro zone…for now.
If he wins: This is the best scenario for the viability of the euro. Greece will continue to comply with the fiscal reform program and will continue to receive support from the Troika. Markets would also rally, at least in the short term. Today, Greek stocks saw their biggest surge since last August based on optimism that New Democracy would win Sunday’s election.
- Syriza Party led by Alexis Tsipras. Radical-left party that many voters have turned to in protest of recent austerity measures.
What he says he’ll do: Syriza is opposed to bailouts and spending cuts, so it will abandon Greece’s rescue deal with the IMF-EU. No more austerity, but no more money.
What you should be concerned about: Syriza’s positions appear unrealistic. Tsipras creates the impression of a painless adjustment, but many believe that cancelling the bailout and staying in the euro is an unfeasible option. Moreover, if he really believes what he said in a recent interview, “The threat to the future of the euro does not come from Greece,” then I’m concerned about him being completely out of touch with reality.
If he wins: A Syriza victory could be the catalyst for a Greek exit from the euro and a return to the drachma. The National Bank of Greece forecasts that this would shrink incomes by 55%, GDP would plunge by 22%, and unemployment would rise to 34%.
The implications of Sunday’s Greek election on the rest of the world cannot be understated. One outcome could see Syriza capitalize on the millions of voters who simply want a change from the past 5 years of recession. Another possibility involves New Democracy rising to power by warning of the dangers of a euro exit. Still, a third prospect involves another deadlock, where a coalition would be formed or a third round of elections would be scheduled. When this happened last month, the Greek market sank to its lowest level since November 1992.
Who do you think stands the best chance of winning? How will the Greek election affect your investing decisions?
Don't count out that Neo Nazi party man, google "golden dawn", they won't win the election but might have the chance to impact future Greek policies and their progress is being called the "rebirth of national socialism in Europe" ... scary stuff
http://www.guardian.co.uk/commentisfree/2012/jun/14/golden-dawn-greek-l…
[quote=Husky32]Don't count out that Neo Nazi party man, google "golden dawn", they won't win the election but might have the chance to impact future Greek policies and their progress is being called the "rebirth of national socialism in Europe" ... scary stuff
http://www.guardian.co.uk/commentisfree/2012/jun/14/golden-dawn-greek-l…]
scary indeed...have you seen this video of one of their MPs assaulting a female MP on a talk show? pretty messed up.
I think the Greek election is gonna way more exciting than the Euro Cup :P
I've also been contemplating about the issue who might win but really got to no conclusion. The rational decision would be to vote for New Democracy as otherwise hell would break lose, but I doubt Greek voters are rational these days. A lot of ppl are enticed by Tsirpas populism and don't realize that he actually has no idea how he wants to solve Greece's problems, except for the fact that he wants others to pay for it. Either way, I think it's just gonna be another deadlock. I'd say 25% chance for either New Democracy or Syriza getting a working majority and 50% for deadlock.
Nevertheless, I HOPE that Greeks realize that Tsirpas means return to the drachma, civil war, international isolation etc. It's gonna be much worse than the austerity measures, so I was kinda happy when the Greek central bank released those estimates, but it seems it didn't have much effect on voter sentiment.
man, im actually quite worried of how popular extremist parties are rising all around Europe. 6 million of French people voted for the extreme right in our last presidential elections, the greek polls show the center-right neck and neck with the radical left... Where are we heading to ? I cannot believe how irrational people can get in times of austerity. Cant people start thinking a bit and realize that radicalization is not going to solve anything ?
BTW, the swiss central bank just announced that it will manipulate its currency to stay pegged at 1.2 against the Euro as it fears the results of the elections in greece might cause a surge in the swiss frank's value
No matter who wins, Greece is not going to exit the euro (at least in the short term). The political rhetoric of Syriza is meant to remind Greeks the perpetrators of the crisis (the two traditional political parties in Greece). Tsipras is not going to end the agreement with the EU/IMF, neither he is going to make drastric changes in Greece (despite what he claims he will do - in Greece politicians have very short memory). What Tsipras is going to do differently though has to do with privatizations / lay offs of public servants, changes that the existing / previous governments is / were desperately trying to avoid due to the strong political relationship between state owned organizations (and their executives) and the traditional political system in Greece. (traditional political system: New Democratic Party and Socialist Party - PASOK).
Regarding the neo nazi party "Golden dawn" they have gained popularity due to the huge numbers of immigrants that live in large urban centers (unfortunately this is a problem for many Greeks since Greece is the first destination of many immigrants comming from Middle East and North Africa that want to enter the EU). They can't and they won't change the political landscape in Greece. They only thing they have to "offer" is assaults to Greek MPs in the Greek Parliament (they have actually warned us for that) - a scene that we have not yet witnessed in our Country.
No one can easily predict how the outcome will be. And many people are saying that if Greeks drop out of the Eurozone, then it would be a complete disaster for them because their currency will slide heavily. But as far as I know, salaries across the workers have been trimmed down about 30~50%, and their pensions have lost much of it's wealth. Even returning to their former currency, they have little to lose now, which makes me to believe that the left-wing party might actually win...
Nice comment, europeancall.
If you are right about the most likely outcome of a Tsipras victory then I hope that he does win. Anything even resembling the status quo in Greece is unacceptable. I just hope that he does not try and go eyeball-to-eyeball with the Germans on revising the auserity measures that were a component of the bailout agreement. With an election looming next year, Merkel will come under harsh pressure from her electorate to hold the line with the Southern European members of the EMU. The German voters will not allow it.
However, I do think that Greece should return to the Drachma. They have always been a low-growth, high-inflation state with generous social programs (If anyone has not read the Greek chapter in Boomerang, by Michael Lewis, please do. It will convince you that the country simply cannot fit in a currency union with Germany and the Benelux countries). Without the ability to devalue their currency through inflation, they cannot sustain the buget deficits caused by their overly-generous social programs. Remaining on the Euro will force Greeks into a way of life that many of them may not like. And it could be a way of life where many of the terms are largely set by politicians in Berlin and bankers in Frankfurt. Probably not going to go over well.
Nihil velit odit perspiciatis impedit molestiae. Et facilis ut nam molestiae quisquam inventore quia. Iure ut expedita distinctio.
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