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Banking on the Greek Election

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( TheStreet) -- The stock market has been relatively unchanged in recent days, despite some sizable intraday swings. The movements suggest that the market is nervously awaiting a decision to be reached.

This is a big year for decisions. Another important vote takes place this week in Europe with Ireland, a country that received a bailout in 2010, holding a referendum on the European Union fiscal compact.

This is a necessary step toward the end-game of eurobonds and a collective monetary, fiscal, and debt policy for all of Europe. The recent polls in Ireland suggest it is expected to pass.

A failure -- or even a very close vote -- may be viewed negatively by the markets. But this is not why the markets appear to be impatiently holding their breath.

Instead, the vote that markets are most focused on at the moment is the June 17 Greek election. This is evidenced by the recent outsized reactions in the stock market to public polling results printed in Greek newspapers.

If the Greek election favors pro-bailout parties with enough votes to form a coalition and avoid the potential for an immediate Greek default, then investors may enjoy a potential relief rally as immediate risks subside. Progress toward a long-term solution for a combined Europe can continue while Greece, a very small part of the Eurozone economy, will remain in a depression.

However, if the outcome of the election is similar to the last one and fails to produce backing for the bailout agreement, the markets will likely continue to slide as a chain of events begins to unfold that holds the risk of a financial crisis.

Potential Post-Election Chain of Events

The series of events following the election if the antiausterity parties garner enough votes to endanger Greece's membership in the eurozone may begin with an acceleration of large withdrawals of euros from Greek banks for fear of a forced conversion to a "new" drachma at a substantially devalued level.

Nearly one-third of deposits have already left Greek banks over the past three years as the risk has risen.

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