This morning the Greek Parliament failed to elect a new president in the final stage of a three stage vote. The Government Coalition’s Candidate Stavros Dimas fell twelve votes shy of the required one hundred and eighty votes.
That’s the story.
So what does it mean?
Well the most immediate consequence is the dissolution of the Greek Parliament and a snap election to form a new government. Multiple news outlets are reporting that Prime Minister Antonis Samaras intends to schedule the elections for January 25th. The opposition party Syriza is leading in the polls and in all likelihood will gain seats in these elections, giving them the opportunity to form a new government. The major goal of this new government will be to renegotiate the terms of the EU-IMF bailout.
Greece has chaffed at the austerity measures put forth as conditions of this bailout. There is a national sentiment that Greece has handed over it’s sovereignty to the European Union. While that concern has some validity to it, it is also the nature of agreeing to join a multi-national currency and failing to meet your economic commitments. Unemployment sits at a ridiculously high 25.5% which believe it or not is an improvement from where it’s been the last few years and Greece’s national debt is equal to around 175% of their GDP. As an individual hypothetical when someone loans you a lot of money it’s not unreasonable of them to demand that you use it to pay off your debts rather than buy a new car or go on vacation. Yes that analogy is a crude over simplification of Greece’s situation but at its core its not all that far off from the truth.
A Syriza led government is expected to take unilateral action to roll back austerity measures and write down Greece’s debt at a time when these measures seem to finally be working to help foster economic recovery. The clearest indication of the expected economic consequences can be found in Greece’s markets where the Athens Stock Market took an immediate 11% hit led by 14% drops in the stock prices of Greece’s two largest banks. Greek bond yields are up over 9% as a result of a large sell off that speaks to a significant lack of confidence now that the Greek Government will pay off all or any of it’s remaining debt.
There is an additional concern that an economic relapse on the part of Greece will result in widespread ramifications for the rest of the Euro-zone; specifically France, Italy, and Spain where governments have been slow to react to the lessons of the last financial meltdown.
Many things are still up in the air and I am by no means an expert in any of this but the ramifications of today’s vote are certainly worth following for anyone out there who regularly uses the euro, dollar, or pound.