Difficult negotiations lie ahead for new Greek government

The victory for Greek left-wing party Syriza paves way for difficult bailout negotiations with the troika. Syriza is the first non-mainstream party in the Eurozone to lead a government since the global financial crisis. The party won the Greek parliamentary elections with 36.3% of the vote and 149 seats (out of 300), at the higher end of pre-election polls and just short of an absolute majority. Syriza’s win was largely expected given its consistent poll lead but its extent was not.

Once a government is formed, difficult negotiations lie ahead to agree on a follow-up bailout with Greece’s troika creditors. In our view, it is likely that an agreement will eventually be found due to the strong mutual incentives of the Greek government and its Eurozone creditors to avoid the worst-case scenarios of Greek government default or Grexit, but an agreement requires significant concessions by both sides, so the negotiations will likely be lengthy and could fail.

The Eurogroup on January 26 will discuss an extension to Greece’s bailout (which expires at end-February), but a formal request for such an extension by the Greek government is required before it can be approved. Negotiations over a follow-up bailout may well take months, in our view, and be associated with some financial market volatility. In this context, it is worth noting that even though an eventual agreement on a bailout is likely needed to keep Greek banks and the Greek government funded, buffers exist to potentially address funding pressures in the interim, such as emergency liquidity assistance for Greek banks or increased bill issuance or arrears for the Greek sovereign.

The post Difficult negotiations lie ahead for new Greek government appeared first on Forex Circles.

Source:: Difficult negotiations lie ahead for new Greek government

About the Author
Forex Alchemy is your daily source of cutting edge information, tips, tools, articles, analysis from across the Forex trading industry. If you would like to guest post or contribute regular articles on Forex Alchemy then please contact us here.

Leave a Reply