This is from Art Cashin’s latest note, and it’s probably the quickest summation of Wall Street’s thinking on Greece, and how it could all melt down in short orders.
Here’s the outlook on Greece from Wall Street watering holes. If a coalition government is formed or looks to be formed, global markets may rally. Any coalition is unlikely to make progress on goals, since
austerity is political suicide. There will likely be another election around June 10/17. A workable majority/plurality remains unlikely, so back to square one. Therefore, Greece will be unable to attain goals by the deadline (June 30). Lacking aid funds, pensions are suspended and government workers are laid off. Protestors take to the streets and government is forced to revert to drachma to avoid social chaos. Pass the peanuts, please.’
This isn’t necessarily going to be correct, but it is a great sumup of current thinking, and it is pretty similar to what people are saying in Greece.
A Greek trader we emailed sent in this:
It currently appears unlikely that any of the three political partiesthat shall receive the Presidential directive to try and form a governing coalition, will be successful. Already the centre-right New Democracy party informed the President of their inability to do so and the ball is now in the court of the leftist Syriza party who placed second in the Sunday elections.
Should they also fail to form an adequate coalition, as is the likely case, then the socialist PASOK
party who came in third in total votes received, will be the last to attempt to form an alliance. Each party has up to three days at its disposal for negotiations with other parties, although probably
neither will need that long ( as was already the case with New Democracy yesterday, who declared inability after only several hours of negotiations ).
As things stand today, it appears most likely that a new election date will need to be set – most probably on June 17 – so that the electorate can reshuffle the cards and hopefully deal them out the second time, in a way that allows for the formation of a governing coalition.
All the best,
Of course, it’s not clear at all why this new election would result in a more stable government.
And it certainly doesn’t sound as though the new government would be any more inclined to work hand in hand with Europe on a reform scheme.
Watch below a report on the Greek election drama and its impact on the markets this week: