The pro austerity, centre right, New Democracy party narrowly gained a majority following yesterday’s Greek election sending Asian markets higher overnight. The party was showing a 29.7% share of the vote versus 26.9% for the left wing, anti-austerity Syriza party.
So a relief rally is on the cards. FTSE 100 futures are up 40 points at this stage, Wall Street also up around 50. But the next few days will be telling with New Democracy now trying to form a coalition with Pasok, a socialist party, and other left leaning parties which will not be straightforward given the experience following the May election.
The election result means that the Greece will remain an integral part of the eurozone for the moment, and honour its financial commitments for now. The problem is the mess still remains. Even if Greeks continue to accept the austerity programme, the country is spiralling downwards with coninued falling GDP and rising unemployment.
With the socialists very much part of the coalition agenda, they will be trying to extract concessions out of Angela Merkel and François Hollande. Much scepticism remains, the Greeks faced a choice between slow ruination and immediate collapse. They chose the former, Merkel may be happy, but political and financial union across the eurozone seems the only option for long term euro survival, and how many Europeans really want that?
Hollande cemented his position in French politics yesterday, with socialists taking a good majority in the French elections meaning France has moved very much from the right to the left with a “tax and spend” agenda with the aim to try and boost economic growth through initiatives such as infrastructure spending.
Now what has the Federal Reserve FOMC (Federal open market committee) got up its sleeve this week in terms of stimulus. QE3?
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