Photo: AP Images
All eyes will be on Greece’s parliamentary elections this Sunday. The leading concern is that the left-leaning Syriza party will have a big win and ultimately push reforms that force Greece out of the euro.BofA Merrill Lynch FX strategist Athanasios Vamvakidis writes that Syriza “will likely be hard pressed to form a government” in the event that they are the victors.
This could cause Greece to “enter a third pre-election period,” according to Vamvakidis, wherein the world gets to relive the recent drama surrounding Greek elections yet again. By then, Greece will have a lot less cash and will probably completely run out of money if they are cut off from troika funding.
Vamvakidis discusses this outcome:
However, we think a more likely scenario if a Syriza government fails to agree with the Troika, before Greece decides whether to exit the euro or not, is another election. Pasok is very likely to withdraw its support for the Syriza government following disagreement with the Troika, or after the government is unable to pay its obligations and the economy is threatened by instability. Such an election could lead to a government that will be more committed to reforms to keep Greece in the eurozone, but by that time the required adjustment is likely to be substantially more difficult and to require even more official funding. In our view, it is too early to determine how the rest of the eurozone will react at that point.
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