In the aftermath of elections, Greece’s future as a member of the Eurozone looks doomed.
Greece’s place as a member of the euro club hinged on the country sticking with stringent austerity measures. Although no overall victor emerged from the election, the mainstream parties that had supported austerity were punished.
CC Davide "Dodo" Oliva (Flickr)
It is possible that another election may have to be held in a few months time if a ruling coalition can not be formed.
This political instability has led to Greeks scrambling to withdraw their money from the banks, prompting fears that the banking system in the country could be about to collapse.
While it is clear that the Greek population do not want want austerity measures, the financial markets of the world definitely do. With the increasing likelihood of a debt default the talk is not of whether Greece is going to leave the Euro but whether it is possible for it to happen in an orderly fashion.
It is not just Greece that has the markets worried, rather it is a reminder that the Eurozone as whole is on shaky ground. Spain’s fourth largest lender Bankia received a government bailout, which was also not well received. It is a sign of how negative the sentiment currently is.
According to an analysis published by Adam & Co investment management the best guess is that the value of the Euro will once again fall as low as $1.27.
While this would be good news for British holidaymakers it would be concerning for the European Central Bank, who would likely feel the need to take measures - most likely an interest rate cut.
It is not just Greece who have elected who the markets consider to be the wrong candidates. In France the election of Francois Holland has also caused markets to wobble, perhaps not surprising given his campaign slogan being “my enemy is the world of finance”.
Are you worried about the Euro in the long term despite good news for holidaymakers? Tell me what you think in the comments below.
Related posts:
May 17, 2023
news