27 Jan 2015
Syriza in power: Let the games begin - ANZ
FXStreet (Bali) - Sharon Zollner, Senior Economist, and Sam Tuck, Senior FX Strategist, both representing ANZ, share their thoughts on the challenges lying ahead for Greece and Europe, calling the situation a giant game of chicken.
Key Quotes
"Syriza won 36.3% of the Greek vote, leaving them just 2 seats short of an absolute majority. They have formed a coalition with the right wing Independent Greeks party, with whom they have an antiausterity drive in common, but not a great deal else."
"The first challenge for the new government will be negotiating an extension to the terms of Greece’s current bailout, which is due to expire on February – Greece faces a heavy redemption profile in coming months. As such, uncertainty is likely to remain elevated until we get clear confirmation from Syriza that they will negotiate constructively with creditors. There is a giant game of chicken going on. No one wants a “Grexit”. But Greece’s trump card in 2012 was that everyone was terrified of the flow-on consequences should they leave the euro."
"For that reason (as well as trying to maintain investor confidence) Germany and others have been keen of late to play down the possible implications of such an outcome, stating the system is much stronger now. That’s not a theory we’d like to see tested."
"But one thing is clear: Greece simply cannot pay back its enormous debt, regardless of the degree of austerity imposed. Kinder repayment terms seem likely, but a huge debt write-down is what’s required. European policymakers don’t seem ready to accept that fact yet."
Key Quotes
"Syriza won 36.3% of the Greek vote, leaving them just 2 seats short of an absolute majority. They have formed a coalition with the right wing Independent Greeks party, with whom they have an antiausterity drive in common, but not a great deal else."
"The first challenge for the new government will be negotiating an extension to the terms of Greece’s current bailout, which is due to expire on February – Greece faces a heavy redemption profile in coming months. As such, uncertainty is likely to remain elevated until we get clear confirmation from Syriza that they will negotiate constructively with creditors. There is a giant game of chicken going on. No one wants a “Grexit”. But Greece’s trump card in 2012 was that everyone was terrified of the flow-on consequences should they leave the euro."
"For that reason (as well as trying to maintain investor confidence) Germany and others have been keen of late to play down the possible implications of such an outcome, stating the system is much stronger now. That’s not a theory we’d like to see tested."
"But one thing is clear: Greece simply cannot pay back its enormous debt, regardless of the degree of austerity imposed. Kinder repayment terms seem likely, but a huge debt write-down is what’s required. European policymakers don’t seem ready to accept that fact yet."