Greek elections: Fear. Anger. Hope?

Strategic Communications

January 22, 2015

Alexis Tsipras dismisses the possibility of a Grexit as pure speculation, Greece’s future is firmly fixed in the euro area but staying within the Eurozone is only possible if EU governments realize that its debt is no longer viable and that prolonged austerity (through the reform programme) is not sustainable. While Greece’s economy grew by 1.9% in the third quarter of 2014, its public debt is still a striking 175% of GDP. Without debt relief, Greece’s economy looks set to remain depressed. This situation is worsened by the emergence of deflation.

Tsipras believes that his election can trigger a wave of change in Europe, including a conference on European debt, in which the issue of the sustainability of the debt of EU member states in austerity programmes would be discussed. Irish and Italian authorities have not excluded their support to such an option. In Spain, SY.RIZ.A’s sister party, Podemos is leading in polls, suggesting that Tsipras might be right in his hope of creating a broader anti-austerity coalition. Nonetheless, these countries might be unwilling to tie their fate to that of Greece, considering the current more favourable status of their country. Upon the renewed Greek discussions, bond yields of other Eurozone countries have not dramatically moved, suggesting that investors see Greece as an isolated case. Other Member States might not want to change that perception.

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