While an election in a country on the far edge of the European Union probably shouldn’t have a major impact on the global economy, many people are warily watching the outcome of the Jan. 25 Greek elections. It’s helping to batter the euro, create heightened worries about the European economy as a whole and spilling over to U.S. markets.
A New York Times editorial set out some of the key issues. Here’s a link to the story. But here’s a quick primer on some of the key issues:
The Greek economy is continuing to struggle to emerge out of recession, years into a strict austerity program after a $300 billion bailout kept the country afloat (and basically kept it in the euro zone and the EU itself).
The far-left Syriza party is vowing to totally turn away from austerity — and it’s ahead in the polls. The party says it will renegotiate government debt, slash taxes, reverse pension cuts and increase public spending — basically a complete turnabout to the current government’s policies.
Renegotiating debt isn’t a simple matter. The party must persuade the European Commission, the European Central Bank and the International Monetary Fund to ease the terms of the country’s debt.
The main power in Europe, Germany, is taking a hard line and saying that no matter what the outcome of the election is, there will be no turning back and there is “no alternative” to structural changes.
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| Greece: Historic and beautiful, but struggling economically. |
“New elections change nothing about the agreements that the Greek government has entered into,” said German Finance Minister Wolfgang Schaeuble. “Any new government must stick to the contractual agreements of its predecessors.”
The EU is on edge. The EU and IMF demanded the austerity measures after the bailout helped Greece pay its debts. Fears are that Greece could be forced to leave the euro zone (and go back to the drachma, perhaps) and could even be forced to leave the EU, although Syriza leaders have said they want to keep the country in the euro zone. If it were to exit the euro zone, it would be the first country to do so since the advent of the currency. And once that taboo is broken, other troubled economies might follow.
The Athens stock market has sold off, and 10-year bonds jumped to above 10 percent yields (in the 2010 crisis, yields were above 11 percent). Unemployment is more than 25 percent. The spillover effect has helped send the euro to below 1.19, a nine-year low.
Stan Shamu, a market strategist at IG in Melbourne, Australia, put it this way:
“Greece could spoil the party in coming weeks as talk of a ‘Greek exit’ resurfaces. The past year has been hard enough for the European Central Bank as the region fought severe economic challenges and attempted to resuscitate growth. … Investors will be monitoring polls very closely heading into the elections. Opposition party Syriza has already started being vocal, talking about a Greek debt haircut and cancelling the austerity measures and bailout package.”
Other matters are also affecting the euro at this time, particularly the continued struggles of the European economy and hints that the ECB will expand monetary stimulus measures to get the Continent moving again. But the Greek elections will warrant watching. Even with a Syriza victory, the magnitude of that victory will be worth taking note of, as will any comments by party leaders post-election.
The outcome in Greece won’t determine the fate of the euro zone by itself, but it’s just another piece of uncertainty that Europe doesn’t need at this time and could cause even more damage to the Continent’s currency.
Best wishes,
Mark Najarian
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Hi Mark
The something for nothing mentality along with corrupt politics at any price has a lot to answer for. As an individual if you fall for this then the party won’t last forever. To imagine that todays society is prepared to dump our debt load onto our children suggests we have gone wrong somewhere.
Hi Mark,
Let me explain a little bit of the history of Greece entering the Europe back seventies last century.
Europe and USA were concerned that communism and communist countries around Greece will prevail and turn Greece in communist country too. That why Greece was accepted in Euro even though did not meet any Euro Criteria to be part of Euro:
1. Never been democratic government. They have been suppressing other minority for century. Makedonijan population which left there after the ethnic cleansing (over a 1,000,000 people) which happened in 1948 with the help of USA and UK as excuse they were Communist. They were forced to leave their homes and everything they had just to save their lives. They were dispersed in Eastern Europe (former Communist countries). They were never allowed to come back in their homes. In contrary that time government repossessed their homes and everything they left over, in order to grant those properties to Greek’s who will marry Makedonijan girls and / or boys just to assimilate to Greeks. The makedonians still have no basic rights in a country member of EU?
That is why they do not want to recognize Makedonijan and Makedonijans and spent billions of dollars bribing Europe politicians just not to recognize Makedonija and keeping it Status Quo until it is possible. That money comes from ECB as a credit for the economy ETC.
I have to mention that in Greece also live Turkish, Albanian and Gypsy minority which have no basic rights in a country member of EU?
2. Greece is a friend and family run banana republic with a massive bureaucracy whit party in government members and friends and families employed in government public services. It is not unusual to have 10 employees for one position employed just to keep their voters and supporters happy. The money used to pay salaries come from ECB again. Greece were always taking from the Europe never giving anything back.
3, Greece is obliged as per Euro law for the refugees to take care of. It is mass exodus for the refugees as they are bitten killed and left to starve as Greeks are the biggest racist in the world. They do not appreciate any other nation rather than themselves. Example is Greek’s Cyprus (only inhabited with Greek population) which Europe was forced to welcome in Europe?
4. Greek’s are grown up in the environment where corruption and avoiding paying taxes is normal way of live. They won’t change the habit. Greece will never pay back their debt as the taxes paid from the businesses and people are just around 50% of the total tax should be collected. (Corruption)
Conclusion Greece and Cyprus should leave Europe that way it is more beneficial fro Europe rather than trailing the ship which is sinking for last 15 years at least.
Europe will come stronger without these banana republics.