Fisher Investments Editorial Staff
Developed Markets, Geopolitics

Grexit Strategy?

By, 05/15/2012

In the cradle of democracy, it seems the populace and the politicians are a bit at odds. Consider the poll results below:

For the Greeks to get the continued euro membership they want, it seems likely they’ll have to toe the line on continued austerity, barring a major about-face from Merkel. But with such high approval ratings at home—despite poor showings by her party in recent local elections—one wonders exactly why she’d do such a thing. And rhetoric from other eurozone politicians seems in line with her position. So ultimately, the stay-in-the-euro Greeks likely need to join Angela’s austerity fans. And that’s where Greek politics get bizarre.

Over a week after Greece’s parliamentary elections, each of the nation’s three largest vote-getters—the socialist PASOK party, far-left Syriza and center-right New Democracy—had their turn in attempting to cobble together a coalition. All three failed. And President Karolos Papoulias’s brokered negotiations don’t seem very close, considering recent rhetoric like Syriza leader Alexis Tsipras’s: “They’re (New Democracy and PASOK) not seeking an accord with Syriza … they’re asking us to be their partners in crime and we’ll not be their accomplices.” The “crime” being the austerity measures Greece’s creditors are requiring in exchange for bailout money—money seemingly supporting the stay-in-the-euro 78%’s goal.

Ironically, what seems likely to happen next runs counter to what else most Greeks say they want. While 72% favor a coalition, pretty much every attempt to structure one comes back to Syriza’s anti-bailout, anti-austerity stance. And that’s where the coalition courting breaks down. So what likely follows is a new election—and (a bit headscratchingly) polls currently place Syriza first—though with only about 20% support.

This 20% of the vote could easily be the reason Syriza has such little interest in forming the coalition the majority of Greeks say they want, as Syriza’s hard line has already won them a greater share. And in that way, the minority seems to be ruling the immediate day in Athens. But the broader fact remains: Combined, New Democracy and PASOK command 149 of parliament’s 300 seats. Meaning all the recent trials and tribulations haven’t changed the fact all they need are two more seats. It is certainly not beyond the realm of possibility they get those in a second election, perhaps picking up a few from the far right or left.

Obviously, the media’s been all over the wrangling, even going so far as to coin the term “Grexit” (because “Greek exit” is just too long to type, we guess). But while Greek voters may not be showing a completely clear vision of what they want in the gap between recent polls and votes, the reality remains few would benefit from a rapid and disorderly euro-rejection (or Grexit, if you prefer). So when all is said and done, perhaps the Greek public gets one thing they want—continued euro membership—through the odd path of a second vote they didn’t.  

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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