Life After the Greek Elections
NEW YORK (TheStreet) -- With (unconfirmed) reports of ballot rigging, voting stations set ablaze and no party winning anything resembling a majority, the stage is set for act three of this Greek tragedy. Entering stage left, in their recurring roles, market insecurity and volatility.
The left-wing party of Alexis Tsipras, the Syriza Party, gained enough votes, about 27%, to remain a political force and cause further damage to an already-fragile environment. The more centrist and established New Democracy Party eked out a victory over the anti-austerity left with 30% of the vote, an outcome that appears to be disappointing the markets.
The difference between the two parties is that Tsipras is attempting to blackmail Europe into changing the terms of the Greek bailout by threatening to abandon the deal altogether, while Samaras, who heads the New Democracy Party, favors a more tempered approach and wants to renegotiate the terms.
The first step after these elections will be an attempt to form a coalition to gain a majority in Parliament. If unsuccessful, as we expect, a new round of elections must be held. Even if a coalition government is formed, we suspect that too much time has passed to alter the trajectory of history.Both parties insist that no one wants to exit the euro or eurozone, but the reality is that the Greek people have spoken, they are divided about the future, and with their voice, they have likely sealed their own fate and further isolated Greece from Europe. Moreover, a Greek exit from the union, previously seen as taboo by European policy makers, is no longer far-fetched. In a recent speech, European Central Bank Chairman Mario Draghi acknowledged the possibility of an exit by Greece and went on to say: "We won't compromise our key principals to prevent that outcome," meaning that extreme compromises from the ECB and northern Europe are unlikely. With near 50% youth unemployment, a sharp contraction in GDP and reports that Greek utilities are rapidly running out of cash, forcing the implementation of rolling blackouts, the political and social environment could hardly be more volatile.
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