ucial things to know about the snap Greek elections
Five crucial things to know about the snap Greek elections
‘Grexit’ a significant risk once more: Berenberg economist
Shutterstock/Florin Stana
LONDON (MarketWatch) — The third time is not a charm when it comes to Greek politics.
Once again, the country finds itself at the epicenter of a political and economic drama after the parliament on Monday — for the third time in two weeks — rejected Prime Minister Antonis Samaras’s preferred presidential candidate.
The failure to line up sufficient backing for former European Commissioner Stavros Dimas in the third and final round of voting has triggered snap elections that could bring the far-left, euroskeptic formation Syriza into power and threaten to derail Greece’s bailout program. In fact, words like “Grexit” and “default” and “accident” are once more being thrown around among nervous market observers.
Expect daily headlines on Greece leading up to the elections and lots of volatility in the financial markets. To stay on top, here are the five key things to know ahead of the parliamentary elections as an investor.
Which parties should I watch for?
Anti-austerity and anti-bailout Syriza, behind charismatic leader Alexis Tsipras, could hold the key to Greece’s future as a member of the eurozone. The party is ahead in opinion polls, and Tsipras appears confident he’ll emerge as prime minister after the elections.
“Be optimistic and cheerful,” he reportedly proclaimed after the presidential vote on Monday. “Austerity will soon be over. The Samaras government, which looted society and decided to take further austerity measures, is finished.”
Syriza has spent years campaigning against the harsh austerity measures imposed on Greece in exchange for the international rescue program and is eager to renegotiate the bailout terms with its international creditors — the so-called troika, composed of the European Central Bank, the European Commission and the International Monetary Fund — sooner rather than later. A major concern is that Syriza and the troika won’t be able to reach new bailout terms, which could force Greece into a disorderly default. The four-year bailout was set to stop at the end of December but was extended by two months to allow Greece more time meet demands from its international lenders.
The other major party in the election is current Prime Minister Antonis Samaras’s center-right New Democracy. The party emerged as the winner in Greece’s last national elections in June 2012 and has as the leader of the coalition government been in charge of the reforms and austerity measures agreed to under the bailout program. However, with unemployment painfully high and economic growth painfully low, Greeks have increasingly turned against the governing coalition with calls for an end to austerity.
What are the risks of a Greek default or a euro exit?
With polls pointing to a Syriza win, the fear of Greece leaving the eurozone is back on the table. Although the party has moderated its anti-euro rhetoric, there remains concern that the drive to end austerity above everything else could cost Greece its membership in the currency union.
Holger Schmieding, chief economist at Berenberg, puts at 55% the probability that Syriza “would push Greece into a serious crisis that — with money running out and neither the troika nor the ECB in any position to help — could potentially catapult Greece into a messy default within the euro or even out of the euro.”
