Sunday, June 17, 2012

Greek knife edge could mean long slow cut

by Joshua Chaffin

Financial Times

June 17, 2912

Greece’s national elections were billed as a make-or-break referendum on the country’s future in the eurozone – and perhaps the future of the euro itself.

As the centre-right New Democracy headed for a narrow victory over the anti-austerity, anti-bailout Syriza coaltion, Europe’s leaders will have breathed a huge sigh of relief.

The defeat of Syriza removes the threat of a quick a quick and chaotic Greek eurozone exit which eurozone policymakers feared most.

Yet the election will still set in motion what could be days – even months – of nail-biting negotiations between Greece and its international creditors.

The prospect of lengthy coalition talks and then further negotiations between a potentially fragile government and Greece’s creditors will bring more of the uncertainty that has roiled financial markets in recent weeks, spreading sovereign debt crisis contagion to the much bigger economies of Spain and Italy.

“The expectation that we get resolution of this near-term is mistaken,” said Mujtaba Rahman, an analyst at Eurasia Group, predicting that Greece and its creditors could bargain for months over the terms of the country’s €174bn bailout.


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