The weekend’s Greek elections saw the pro-bailout party New Democracy come out on top. Antonis Samaras the party’s leader now has the task of forming a coalition government strong enough to push through austerity measures needed for the country to receive the rest of its bailout.
The leader of the second placed SYRIZA party Alexis Tsipras has made that task more difficult, he said; “I will not join a coalition government. I told Samaras that it would be a catastrophe to continue with cuts to wages and pensions. Democracy must resist violent acts; we have very difficult moments until June 28 we now have better bailout negotiation opportunities. Greece must take advantage of this. We respect the election result.A government must be formed based on New Democracy because that is what the people wanted – but they will be judged by the people. Country must have a government tonight. We will be a powerful opposition, we will control government. Role of opposition is to be critical and responsible. Whoever takes the responsibility to form a government, takes the responsibility to negotiate the bailout.”
The markets showed a brief rise as the result was revealed but the optimism was soon replaced by further worries over the state of the Eurozone. Many investors have little faith that the new Greek government will be able to live up to its commitments to the bailout and fear that the result has merely delayed the countries inevitable withdrawal from the single currency.
The currency markets showed that the Euro made gains against all of its peers, rising to a month high. The euro reached $1.2748, the most since May 22, before trading at $1.2710. It sank to $1.2288 on June 1, the weakest level since July 2010. The euro jumped 1.2 percent to 100.65 yen and gained 0.6 percent to 80.90 U.K. pence after touching 79.68, the weakest since May 16.
The investment group Fitch said; “While the risks from Greece have fallen for now, the severity of the systemic crisis engulfing the Eurozone is unlikely to diminish until European leaders articulate a credible roadmap that would complete monetary union with much greater fiscal and financial integration.
Downward pressure on the sovereign credit profile and ratings of Eurozone sovereign governments will intensify so long as a credible path to closer union and a more coherent and united policy response are absent. This includes further boosting the financial backstops against contagion.”
Pressure from non EU countries has begun to pile up as foreign nations are becoming increasingly concerned over the situation. China, Japan and Australia have all called for Greece to quickly form a government.
“The Greek parties must work together to form a new government quickly and convince the Greek voters of the need for painful austerity,” China’s official Xinhua news agency said in a commentary. “They must understand a Greek exit from the Eurozone is out of the question,” it added, adding that ditching the euro would open a “Pandora’s box”, leading to “years of painful economic and social adjustments”.
The Japanese Chief Cabinet Secretary Osamu Fujimura said: “Our country hopes that a stable government will be launched early and make progress towards stabilising markets… We hope that European countries will urgently take measures to strengthen its financial sector.”
The calls come as the G20 meets in Mexico. Financial experts around the world are hoping that the combined pressure of the USA and other non EU members will finally force the Eurozone members into definitive action.
Robert Zoellick, World Bank president summed it up, saying; “Everybody knows that this meeting is coming at an absolutely critical time. We’re waiting for Europe to tell us what it is going to do. Markets can manage and hedge risks that they are generally aware of. The danger we’re creating is that the pattern of policymaking is increasing uncertainty.
The Pound to Euro exchange rate is currently trading at 1.244
The Pound to US Dollar exchange rate is currently trading at 1.565
The Euro to Australian Dollar exchange rate is currently trading at 1.247
The Euro to US Dollar exchange rate is currently trading at 1.257
The Euro to Pound exchange rate is currently trading at 0.802