What Greece’s Election Results Mean for the Euro

Unless you’ve been living under a rock, you’ve probably heard that Greek Prime Minister Alex Tsipras has emerged victorious in the latest elections. The seers over at the country’s Interior Ministry projected that the Syriza party had been able to secure 35.5% of the votes, which are enough to defeat its biggest rival, the New Democracy party.

Huh? What were these elections for?

greece bailoutWhile the Greek debt drama seemed to reach its happily-ever-after last month when the country managed to unlock its third bailout, the current government still had a lot of work to do when it comes to convincing the rest of the population to accept its fate. Recall that Tsipras and his Syriza buddies had been trying their very best to live up to their anti-austerity promises by playing hardball with Greece’s creditors and calling for a nationwide referendum to reject more spending cuts. However, the IMF and other European lenders refused to back down as well, forcing the Greek government to accept harsher austerity measures in the end.

Because of that, Tsipras doubted that he’s the hero that Athens deserves but not the one it needs right now, so he decided to put it up for a vote. Because he can take it. Because he’s not our hero. He’s a silent guardian, a watchful protector, a dark knight.

Oops, got too carried away with that one!

Despite the opposition and criticism that Tsipras has faced even from within his own political party, the poll results revealed that majority of the Greeks seem to be fine with the status quo probably because they’re worried that another change in government could bring about more financial chaos. After all, the standoff during the bailout negotiations earlier this year has resulted to strict capital controls, temporary bank closures, and bad days for businesses – a situation that they’d rather not go through again.

So now it’s all good?

Not necessarily. Even if the Syriza party has been able to stay in the lead, they are still likely to fall short of securing majority of the 300-seat parliament. This means that a coalition government will have to be formed, with Tsipras likely to conduct negotiations with the other political parties to see who they’d like to share the stage with.

Now this could still prove to be crucial for the country’s debt situation, as the coalition parties will have to be on the same page when it comes to implementing the austerity measures required in the bailout package. Keep in mind that an international review of Greece’s progress on its economic reforms is due by the end of this year and creditors can still close the taps on the 86 billion EUR bailout program if they’re not satisfied with the results.

Will the euro still be affected by all this?

Based on its forex price action for the past few weeks, it looks like the euro has been able to move on from the Greek debt drama and focus on fundamentals and other market factors. In fact, the shared currency drew a bit of support from improving euro zone data for quite some time but soon erased its gains during the global stock market turmoil and when ECB Governor Draghi shared that they’re willing to ease further if necessary.

With that, the euro’s forex movements might be more sensitive to negative news that might come out from Greece in case any signs of political trouble show up. Better keep close tabs on those headlines then!