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Monday, January 26, 2015

Greece Unwittingly Votes For Grexit

Greece has voted for an anti austerity coalition led by Syriza.

From the EU's point of view this exercise in democracy is the worst possible outcome. Syriza has vowed to "end austerity" and to renegotiate the bailout package.

However, it is highly unlikely that the political rhetoric will become reality. Whilst the EU does not want a member state to leave the Euro (as that would undermine the doomed experiment), it knows that were it to kowtow to Syriza's demands it would set a precedent for other nations (eg Spain) to demand renegotiations.

The reality facing Greece is that as and when Syriza's attempts to renegotiate/renege on the terms of the bailout fail (and they will), Greece will be faced with the choice of continuing with the terms of the bailout or leaving the Euro.

As regards the latter, there are already plans in place (in the ECB and banks/financial organisations within the Eurozone) for such an exit which Germany will be keen to implement. Greece has, whether it realises it or not, has voted for an eventual exit from the Eurozone.

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