2nd January 2015

Greece fails to elect new president, snap elections ahead

The Greek parliament failed to elect the new president in the third round of the vote on 29 December. This means that the parliament will dissolve itself and new general elections will be held within max. 30 days. The outgoing Prime Minister Antonis Samaras called the presidential elections well-ahead of the March 2015 deadline (when the current president´s term expires). This move was not expected and its motivation is still somewhat unknown. It is possible that Mr Samaras wanted to accelerate the inevitable to provide clarity. The last tranche of the international aid to Greece is due to come in the coming months and the program is set to end, meaning the return of Greece to financial markets. The first attempt, though, did not go well and Greece will therefore surely need an emergency credit line from the EU bailout fund – a step Mr Samaras tried to avoid.

But the failure of the Parliament to elect the president makes things worse. According to the polls, the snap elections in late January will be won by Syriza, a far-left coalition led by Alexis Tsipras. The party is strongly anti-austerity and promises unrealistic spending to improve the Greeks´ lives – which were objectively not easy during the last years of crisis. If Ms Tsipras wins by an important margin, he could form a one-party government. If this were the case, Mr Tsipras would attempt to end the program, reverse some of the austerity measures and write off a part of the Greek public debt, all of this while staying in the eurozone. Although all these measures are incompatible with the eurozone´s rules, Mr Tsipras counts on the fact, that the EU leaders will not let Greece go, just as they did not in 2010. This time, though, he might be wrong. The German Chancellor Angela Merkel already stated, that the eurozone is not as fragile as it had been back then and therefore a “Grexit” would be no disaster.

On the other hand, if Mr Tsipras does not get absolute majority and fails to form a coalition government, which seems ever more probable as his party falls in the polls, more political instability will follow. And political instability equals financial instability, especially in Greece. Following the failed third attempt to elect the president, the index of the Athens stock exchange fell by 11%.

According to the latest polls, Syriza would come first in the vote with around 30%, followed closely by New Democracy of Antonis Samaras with more than 27%.

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Members of the American Chamber of Commerce in the Czech Republic