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Eurozone status hinges on general election results in Greece

Stephanie Johnson

Political crisis in Greece has investors on edge (Part 2 of 5)

(Continued from Part 1)

The political situation in Greece

For more background on the political situation in Greece, read our earlier series, How Greece’s political crisis may impact your investments in the Eurozone.

On December 9, Greek Prime Minister Antonis Samaras of the ruling New Democracy party announced a snap presidential election to begin December 17. The successful presidential candidate needed a three-fifths majority, or 180 votes, following a three-round vote in Parliament ending December 29.

December 29 upset

But on December 29, the favored candidate, Stavros Dimas of the New Democracy party, finished 12 votes short of the required majority. As a result, the country must proceed to full elections, likely to be held on January 25.

Previously, Market Realist predicted that if Dimas failed to win the snap election, Alexis Tsipras of the opposition Syriza party would be a strong contender to win the subsequent general election. Recent opinion polls show Syriza enjoying a 3% lead over the New Democracy party.

Could Syriza win the presidency?

The European “troika” consists of the European Central Bank, the European Commission, and the International Monetary Fund.

The Alexis Tsipras-led Syriza party is staunchly opposed to the austerity program set out by the troika.  The party was opposed to the measures imposed upon Greece by the financial institutions when the country first received a bailout back in 2010. And it’s opposed to further reforms, now.

If elected, the Syriza party intends to do away with the austerity commitments agreed to when Greece signed on to the bailout program. However, disobeying the troika’s rules could threaten Greece’s position within the Eurozone itself. The Syriza party has said it wants Greece to stay in the Eurozone. But how it will manage to remain a member of the monetary union while shirking the requirements set by its regulators is not yet known.

When all is said and done, what lies ahead for Greece will be decided January 25. Meanwhile, the uncertainty of the country’s current political situation is weighing heavily on the Greek investment climate. Investor fears have multiplied, affecting the Global X FTSE Greece 20 ETF (GREK), along with broader European ETFs such as the Vanguard FTSE Europe ETF (VGK), the iShares MSCI EMU ETG (EZU), the SPDR EURO STOXX 50 ETF (FEZ), and the iShares Europe ETF (IEV).

Continue to Part 3

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