Greece Votes: Euro Awaits Results

Greece votes today in a General Election which is expected to produce a change in government. The Greek government is currently dominated by the conservative New Democracy party, but the most recent opinion polls forecast that the left-wing Syriza party will be able to take power following today’s vote. An exit poll is due to be released at 5pm GMT today as soon as the polling stations close. The exit poll and the inflow of real results may be expected to impact the Euro when the Forex market opens Monday morning in Australasia.

Greek Opinion Polls

All the polls last week showed Syriza in the lead over New Democracy by margins between 2% to 7%. Significantly, Syriza’s lead has widened in most recent polls. However, these same polls are also showing that about 10% of voters likely to vote have still not decided for whom they will cast their ballots.

Syriza’s Policies

Syriza are strongly pledged to re-negotiate part of Greece’s enormous debt and, in effect, are demanding a partial write-off. They are also committed to rolling back the austerity measures that have been borne with great hardship by most Greeks over recent years. These two measures are the bedrock of the part’s appeal, and as they have never been in government before, it is difficult to see how they would possibly be willing to make significant compromises upon these major policy planks.

The fear is that Syriza’s policies on Greek debt and austerity measures will lead to an insoluble clash with Germany and the other major players within the Eurozone, leading to a Greek exit from the Euro. However, the fear is probably exaggerated, as neither the Greek public, Syriza, nor the other Eurozone governments want to see this outcome. It seems that each side is playing “chicken” with the other, threatening a Greek exit to secure more favourable terms for whatever deal would eventually be struck between a new Syriza government and the ECB.

Election Outcome: Market Impact

If New Democracy manage to defy the polls and hang on to power, the market can be expected to see the future as “business as usual”. It is unlikely it would be a catalyst to immediately strengthen the Euro significantly, but volatility in the Euro would probably reduce.

If the outcome is a Syriza victory, the market will face two unsettling points of uncertainty: first, underlining that new, untried, anti-establishment parties are on the rise, with Syriza being the first such party to take power. This in itself can be expected to have an unsettling effect. Second, a period of hardball negotiations will begin; with each side trying to show it is not afraid of a Greek exit, daring the other side to provoke it. The longer such negotiations go on and the more threatening they get, the more likelihood that the market will start to put pressure on vulnerable Eurozone financial instruments, which might lead to some frightening moments for the Euro. However, as a Greek exit in itself could logically strengthen the Euro, it is hard to say what would happen beyond lots of volatility. If a stage is reached where the entire currency union as we know it looks endangered, we could expect the already very weak Euro to plummet.

The market is likely to have already priced in a Syriza victory, so in the event of a New Democracy victory, the Euro is likely to strengthen in early trading as the markets open.

Adam Lemon

Adam Lemon began his role at DailyForex in 2013 when he was brought in as an in-house Chief Analyst. Adam trades Forex, stocks and other instruments in his own account. Adam believes that it is very possible for retail traders/investors to secure a positive return over time provided they limit their risks, follow trends, and persevere through short-term losing streaks – provided only reputable brokerages are used. He has previously worked within financial markets over a 12-year period, including 6 years with Merrill Lynch.