EURUSD The Path to the End of the Euro Begins in Greece
New Prime Minister Alexis Tsipras has promised to renegotiate agreements with the European Commission, European Central Bank and International Monetary Fund “troika” and write off much of Greece’s 320 billion-euro debt, which at more than 175 percent of gross domestic product, is the world’s second highest after Japan.
Greek leftist leader Alexis Tsipras promised on Sunday that five years of austerity, “humiliation and suffering” imposed by international creditors were over after his Syriza party swept to victory in a snap election on Sunday.
With about 60 percent of votes counted, Syriza was set to win 149 seats in the 300 seat parliament, with 36.1 percent of the vote, around eight points ahead of the conservative New Democracy party of Prime Minister Antonis Samaras.
While a final result may not come for hours, the 40-year-old Tsipras is on course to become prime minister of the first euro zone government openly opposed to the kind of crippling austerity policies which the European Union and International Monetary Fund imposed on Greece as a condition of its bailout.
“Greece leaves behinds catastrophic austerity, it leaves behind fear and authoritarianism, it leaves behind five years of humiliation and anguish,” Tsipras told thousands of cheering supporters gathered in Athens.
Coming after the ECB’s move to pump billions into the bloc’s flagging economy, Sunday’s result will stir consternation in Berlin. A senior lawmaker in Merkel’s conservative party said the result showed Greek voters had turned away from austerity but he said Europe could not accept rejection of the bailout.
“We must not reward the breaching of agreements,” Wolfgang Bosbach told the daily Osnabruecker Zeitung newspaper. “That would send completely the wrong signal to other crisis-stricken countries that would then expect the same treatment.”
As well as renegotiating a debt agreement, Tsipras wants to roll back many of the measures demanded by the “troika”, raising the minimum wage, lowering power prices for poor families, cutting property taxes and reversing pension and public sector pay cuts.
Markets had been jittery in the run-up to the vote but growing confidence that a deal could be reached has helped ease fears of a return to crisis.
U.S. investment bank J.P. Morgan said the result could weigh on markets but that it considered speculation over a possible Greek exit from the euro was “a stretch” and a negotiated deal appeared the most likely outcome.
It added: “our base case remains that a Syriza government or Syriza-dominated coalition would alter its platform to retain troika financing.”
Syriza officials have said they would seek a six-month “truce” putting the bailout programme on hold while talks with creditors begin.
Greece, unable to tap the markets because of sky-high borrowing costs, has enough cash to meet its immediate funding needs for the next couple of months but it faces around 10 billion euros of debt repayments over the summer.
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