Friday, June 15, 2012

World (Central Banks) Braces for Greek Election on Sunday

Any insight on the possible or likely outcome, European readers?

From Bloomberg News (6/15/2012):

Greek Candidates Make Final Pleas Before Vote With Euro at Stake

Greek political leaders made their final campaign pleas before elections tomorrow that may determine whether the country becomes the first member of the euro to leave the currency union.

“The first thing we must determine in the elections on June 17 is to choose between the euro or drachma,” New Democracy leader Antonis Samaras told a crowd of flag-waving supporters in central Syntagma square last night. He faced the Parliament building in Athens, the site of protests against austerity measures demanded in return for 240 billion euros ($303 billion) of emergency aid pledges. A vote for the anti- bailout Syriza party “means Greece out of the euro,” he said.

The vote will turn on whether Greeks, in a fifth year of recession, accept open-ended austerity to stay in the euro or reject the bailout conditions and risk the turmoil of exiting the 17-nation currency. World leaders, who gather for a summit in Mexico June 18, have said they’d prefer a pro-euro result, underscoring concern over global repercussions.

Almost 10 million Greeks are eligible to vote for the second time in six weeks after a May 6 ballot failed to yield a government.

Exit polls will be released when voting ends at 7 p.m. in Athens, with a first official result estimate due around 9:30 p.m. The final polls, published on June 1, showed no party set to win a majority.

Syriza leader Alexis Tsipras, who promises to renege on Greece’s end of the bailout deal, and New Democracy ran even in final opinion polls. The socialist Pasok party, which won the 2009 election and led the country into the bailout, was third at about 13 percent.


Tsipras told Athenians June 14 that he was sending a message that nobody should bet on Greece leaving the euro area.

“Turn your backs on the two parties of bankruptcy,” Tsipras told supporters, referring to the Pasok and New Democracy parties which co-signed the rescue. They “lowered the Greek flag and surrendered it to Angela Merkel”-- the German chancellor who led the demand for austerity -- he said.

(Full article at the link)

With the rumor (or was it an announcement? or does it matter?) that the world's central banks (ECB, FED, BOJ, etc.) will intervene in case of a dire credit crunch that may happen depending on the result of the 2nd Greek election this Sunday, there seems to be nothing to lose for the Greeks to vote out the incumbent parties.

Judging by how the stock markets around the world fared toward the end of this week (particularly that of the US), the central bank intervention is very much priced in.


rtega said...

Nobody has a clue as to how it will go. I think people in financial businness will have a restless weekend watching the news. It tells you something about the fragility of our economic system that the mere news of a anti-euro party winning the greek elections would send the stock markets crashing down.

Anonymous said...

As far as the greek left alliance announced, the party is pro-euro but against austerity measures which led to a austerity-recesion loop. Who told you they are anti-euro?

In fact the whole situation is a game which will lead either way to bankruptcy. There is no real help except the loans which were paid to satisfy the german, french and other creditors. It is so ridiculous to see e.g. the germans act as good Samaritan.

Even if Greece wouldn't exist the crisis would ignite somewhere else with the same result.

Anonymous said...

@Anon 11:17am

Yes, Greek people would like to keep the euro, but not adhere to the agreements with the troika. While one can debate whether the austerity measures are appropriate, one should not forget how Greece got into this crisis.
Greece cooked the books from 1997 to 2003 to enter the Eurozone. Goldman Sachs helped Greece to do so by doing some 'creative accounting'. Greece slid into recession in 2008 and the situation deteriorated. Deficit figures had to be corrected to over 10%. Consequently, rating agencies had to lower their credit rating for Greece. Eventually, the EU & IMF had to support Greece (with $110 billion euro) as Greece could not get money on the market. Greece's government and banks currently survive on international aid only. The deficit climbed to 15% and creditors agreed to a haircut. Meanwhile the Greek government is not fully implementing reforms and delaying the enactment of new laws. Unemployment is rising, people are protesting on the streets and unable to elect a new government. Last weekend Nea Dimokratia won the electon, but I don't think that they will be able to get Greece back on track. Samaras was against the austerity measures when Pasok accepted them. Now he is pro-Euro and wants to accept them.
Now you tell me who rode this country into the ditch. Greece had a big chance to develop the country when they entered Eurozone. A hard currency and access to cheap money. However, the politicians in charge totally blew it and mismanaged the country by inflating the public sector and not using the money wisely. The Greek people pay for it right now and should be very angry with their incapable politicians, but not with countries who support them. To be honest, I don't think that Greece will make it out this mess. The Euro project is about to become a failure and indebted countries are dragging down the whole region. I bet that Germany will be in recession in 2013/14.
The puppets in Brussels also don't have a solution for the problem and keep on muddling through, hoping that they will survive the big bang. It's only a question of time when Greece will leave the Eurozone and which countries will follow.

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