NEW YORK (TheStreet) -- Markets reacted with relative calm Monday after Syriza, the left-wing anti-austerity party led by Alexis Tspiras, emerged victorious in Sunday’s Greek elections.
Syriza campaigned on promises to negotiate a write-down of Greek debt and loosen the grip of austerity policies imposed on Greece by its creditors in exchange for more than 240 billion euros ($270 billion) in aid received since 2010.
Though the Athens Stock Exchange dipped over 3% on Monday, the value of the euro and European equity markets rose slightly on a general belief that a negotiated solution to Syriza’s demands could be achieved.
U.S. markets were also calm, with the Standard & Poor's 500 Index up slightly over 0.1%. Yields on Italian and Spanish debt declined, underscoring a sense that any market contagion would be unlikely. With the exception of Greek debt or stocks with significant direct exposure to the Greek market, little immediate impact could be seen for American investors.
Without ongoing aid, Greece is likely to miss its next round of debt payments, and may trigger the nation’s departure from the European Union, an outcome commonly referred to as the "Grexit." But the markets’ subdued response on Monday suggests that Greece is likely to arrive at a negotiated austerity solution with the so-called “troika” of European Central Bank, International Monetary Fund and European Commission creditors, rather than default on its debt or exit the EU.
Diane Swonk, chief economist at Mesirow Financial, a Chicago-based financial-services firm, says both Tspiras and the troika understand the enormity of the situation, and thus are likely to negotiate a solution.