Dear World: Beware Of Greek Voters Bearing Gifts

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Markets are rallying on reports that a Greek government coalition will be confirmed today and that Antonis Samaras will be sworn in as prime minister.But in a new note, HSBC chief economist Stephen King writes that there isn’t much to celebrate and that Samaras’ victory offers some respite but no answers:

“In the midst of the euphoria that will doubtless dominate financial markets in the days ahead, a few choice facts will be conveniently pushed to one side. New Democracy was, arguably, the party that got Greece into its current mess in the first place, having been in office between 2004 and 2009. Pasok was the party in charge of putting things right between 2009 and 2011. During that period, the Greek economy collapsed, too many austerity promises were broken and the Germans and French eventually ran out of patience, warning Greece that, if it didn’t behave, its days in the euro were numbered. And Greece has no real history of cosy coalition politics: it may just be possible to form a government after Sunday’s election but how long it will last is another matter altogether.

Mr Samaras, meanwhile, will doubtless be hoping to renegotiate Greece’s austerity obligations once again. In that regard, the mainstream Greek parties are not so different from Syriza, much to the irritation of Greece’s European partners. The Troika’s ongoing frustration with Greece, after all, has been the yawning credibility gap between promise and delivery with regard to both austerity and long-run structural reform.

So before we all drink too much celebratory retsina, it’s important to recognise that Greece still has mountains to climb. True, there have been big improvements in the fiscal position over the last year or so but Greek access to international capital markets is non-existent, the economy has already contracted 16 per cent and is set to shrink further, and its creditors expect to see a lot more reform than has so far been delivered.”

What’s more? The eurozone has plenty more of its own problems to resolve. It needs to move towards a fiscal and political union, the southern European countries need to improve their competitiveness, and the battle between northern European creditors and southern European debtors is likely to continue.

King’s final word: “”Beware, then, Greek voters bearing gifts.”

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