On the 25th of January, the Greek people elected Syriza, a “radical coalition of the left”, to power. The headlines were that the new government planned to reverse the austerity measures imposed on Greece as conditions of two IMF/EU rescue deals (“bailout” is to weak a word to accurately describe them) and that they would get half of the debt written off. In power, the new Greek government immediately gave conflicting messages: on the one hand, they would honour their election pledges and on the other, they would not renege on their obligations, seeking to find common ground with their European partners.
Press stories have covered the gamut of scenarios from a Teutonic meltdown where the Germans acquiesce to Greek demands in order to preserve the Euro and even the existence of the EU, to dire warnings of “Grexit” where Greece is forced to leave the Euro. EC president, Jean-Claude Junckers went a great deal further pointing out that a “Grexit” would also entail Greece leaving the EU although it was not clear if he was speaking from a personal standpoint or if this is the position of the European Commission (it would almost certainly be a matter for the Council of Europe and the leaders of the EU, in any event). Sections of the press suggest that “Grexit” would be disastrous for the Euro and that markets are in “turmoil” as a result of the on-going Greek drama. A meeting between Greece and Eurozone officials on Wednesday was best described as cordial but unproductive in a concrete sense.
So, let’s just see how tumultuous the last three weeks have been in terms of the currency and the markets. From the positions on the 16th of January, nine days before the vote, to the situation on Friday of last week: the Dow is up by 1.8%; the Nasdaq is up by 2.4%; The FTSE is up by 4.6%; the Dax is up by 6.7%; the CAC is up by 7.1% and the Nikkei is up by 4.7%. This tends to suggest that investors are not panicking about the Greek crisis yet, at least. It is striking that the rally is strongest in Eurozone stock markets.
On the currency front, the Euro has softened by 1.6% against the Dollar; it is down by just 0.2% against the Japanese Yen and it is down by 2.4% against Sterling. Whilst these values do suggest downwards pressure on the Euro, they do not support the idea that the Euro is on life-support and its anxious relatives will be flipping the switch any time soon.