Syriza Won The Greek Election, Now What?

Over the weekend, Greek voters elected the radical leftist Syriza party into power. The outcome wreaked havoc on European markets, causing the euro to dip below $1.11 and sending 10-year government bond yields across the bloc tumbling. Many worry that the party’s bold demands will eventually lead to Greece’s exit from the eurozone.

 

Troika Negotiations

 

The first hurdle that the eurozone will face now that Syriza is in power is negotiations over the nation’s debt burden. Alexis Tsipras, the party’s leader, has said he plans to reverse Athens’ painful austerity cuts and abandon its bailout plan in order for “Greece and its people to regain their lost dignity”. The first step in doing so will be negotiating with the country’s Troika of lenders to consider debt write downs and loser conditions. 

 

ECB Easing Could Create Incentive

 

While the new government has been fiercely against continuing with the bailout program, European Central Bank President Mario Draghi added some incentive to staying the course last week when he said the bank will likely be able to begin buying Greek government bonds in July. This, Draghi said, would be a possibility only if the Greek government was able to come to an agreement with the Troika over its bailout conditions. Many believe that the ECB incentive will be powerful enough to keep Syriza from breaking from the currency union; though talks with the Troika are still expected to be heated.

 

Unrest Spreads

 

While most agree that the probability of a Grexit remains low, Syriza’s victory will have far reaching consequences across the continent. Other radical, anti-euro parties are beginning to gain traction in struggling economies due to the exposure Syriza has gotten. In Spain, the “Podemos” movement has been steadily rising in opinion polls and similar nationalist movements in Italy, the UK and Germany are also gaining momentum.

Posted In: EurozoneTop StoriesEconomicsMarketsEuropean Central BankMario DraghiSyria
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