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Greek Uncertainty Weighs On Euro

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Greek Uncertainty Weighs On Euro

The euro made its way lower on Tuesday morning after a presidential vote in Greece on Monday ended with the nation in a state of political uncertainty. The common currency traded at $1.2188 at 5:30 GMT as markets worried that the nation would fall into another financial crisis.

The Wall Street Journal reported that current Prime Minister Antonis Samaras’ candidate for head of state failed to gain a two-thirds majority in a parliamentary vote on Monday. The outcome will thrust the country into snap elections early next year, something many worry could spell disaster for the nation’s financial system.

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Current polls show that the left-wing Syriza party is a favorite to gain control of Greece’s government, something markets are uncertain about. The party has vowed to exit the nation’s unpopular bailout program early, which could cause Athens to default on some of its loans. Many are also worried that an early exit from the bailout program could lead to an exit from the euro as well.

However, with the elections scheduled for January 25, the Syriza party is far from having a landslide victory that will allow it to control the entire government system. Many also believe that in an effort to become more mainstream, the party will tone down its combative policies.

Meanwhile, investors are beginning to speculate about whether or not 2015 will bring about more stimulus from the European Central Bank. Most are expecting the bank to make a move early in 2015, but the question is when and how the bank will react to the region’s falling inflation and struggling economy. Bank President Mario Draghi has assured markets that the bank is willing and able to act if need be, but so far the ECB has been reluctant to roll out a large-scale quantitative easing program.

 

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