|June 19, 2012
Source: Liberty CPM News
Things should remain calm in Greece for the next couple of weeks. Affairs will be internal as the largest party, New Democracy (ND), will attempt to form a coalition government.
This is likely to transpire in one way or another as the risk of eurozone collapse will implore political leaders in Greece to reach a consensus in order to enter into talks with European partners, namely the ECB and Germany.
The coalition will support the euro and it will likely support a bailout program. But, discussion of “austerity” will lead into a world of euphemisms as to what degree austerity can be implemented will be discussed.
European partners will insist on further austerity and will be disinclined to provide financial assistance, even though the living standards of Grecians has been already lowered by 30% or so.
Europe, however, has a history of instability with its multi-party structures, and it could take more votes before a stable government can be formed.
A third bailout is likely, but these funds are unlikely to come from Germany, etc. Instead, Greece will have to enter into talks with global players, including the International Monetary Fund, the World Bank and perhaps even the Bank for International Settlements itself.
But, over the coming weeks, as instability becomes apparent in Greece, and Europe begins putting pressure on the nation to get its internal affairs together, markets will again begin feeling the pressure. After the pop in the stock market, Friday, markets have already begun their post-vote hangover.
At any moment, contagion could cause the crisis to spread to London and then the United States. We saw this with the JPMorgan losses of $2 billion.