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Alexis Tsipras and the Euro
Written by: PaxForex analytics dept - Tuesday, 27 January 2015 0 comments
The Greek elections are over and Greek President Papoulias has sworn in Alexis Tsipras as the new Greek Prime Minister. Alexis Tsipras is the leader of the Syriza party which has promised to get Greece back on track and out of the Eurozone which would also eliminate the Troika restrictions on Greece and will allow the Mediterranean nation to restructure its debt problems outside of German influence. Many are worried about the impacts this may have on the already weakened Euro.
Syriza formed a coalition government with the right wing Independent Greeks party which enforces the will of the new Greek government to seek independence especially from the Eurozone. Many Greeks are unhappy about the steps taken by the previous Greek government which gave in to Troika demands for bailout money. This has left Greece with little to no control of their own future for decades to come and explains the electoral victory of radical parties in Greece.
The new Greek government will fight to put Greece back under the control of the Greek people which means that they will at the very least use the threat of leaving the Eurozone as a bargain chip in order to renegotiate its current debt obligations with Troika. Nobody is sure what
will happen if Greece will become the first country to leave the single-currency block and given the very fragile economic as well as monetary environment in the Eurozone it is unlikely that politicians want to test this case just yet.
The victory of Syriza and the formation of a coalition government with Independent Greeks could have not come at a better time for Greece and at a worse time for the Eurozone and the European Central Bank. The new Greek government is aware of the weak position the Eurozone is and what it could mean for the economy if Greece would leave. The chaos which is likely to result from a Greek exit is a price the Eurozone and the ECB cannot bare at the moment. Therefore all points towards heavy renegotiations of the current deals in place.
This means more heavy losses by all countries and their tax payers who have bailed out Greece which is likely to stir up even more issues around the Eurozone. The Euro has launched a strong two day rally after the EURUSD briefly traded below the 1.1100 mark. The rally has taken this currency pair higher by over 200 pips in the past two trading sessions amid optimism for a calm solution to the Greek drama. The EURUSD is on course to finish the week strong and could approach the 1.1500 mark over the course of January.