Posted by Allison on 19 June 2012, 06:34
It has been a dramatic weekend. The second election in Greece has led to a narrow victory by New Democracy. With that said however, their margin is narrow enough that they will need the support of another party to form a ruling coalition.
Many people have said that the vote for New Democracy can be compared to a vote for the Euro, instead of the idea of going back to the drachma. But is this the result we will get? Or is it too early to assume the election has put an end to the uncertainty?
The markets were definitely not convinced. The Euro didn’t strengthen to any great degree and indeed some of the other world currencies looked to be stronger as a result. So while there was a result of sorts in the election, it was not perhaps the defining result some would have hoped for. There is still uncertainty over the terms of the bailout deal for Greece, so this is very far from being a thick line drawn underneath the troubles.
It will be interesting to see what happens in the coming days as the new government is formed and discussions take place over the terms of the bailout deal. Those in Greece have voted to keep the Euro as their currency, but only by a very small margin. The second placed party was not far behind and still has support from a huge swathe of voters. There was less than three per cent between the two leading parties in the election. So it will be intriguing to see whether the new government has a strong opposition to its plans – every indication is that it will do.
Of course in the first election the leading party – New Democracy again – could not get the coalition in place. There is a chance the same thing could happen again this time. If it does, one wonders what on earth would happen next. Whatever it would be, it would not be good for the single currency or the Eurozone.