Hold off on the Champagne!
While the recent election in Greece provided victory to the pro-bailout parties, the win was not convincing showing the obvious disharmony and split of opinions between its citizens. What the election did achieve was to relieve markets of the uncertainty surrounding the future of Greece within the Euro, at least in the immediate future.
From a political standpoint, the new government will need to regain some of the confidence lost over the last couple of years before it can implement any measures to take the economy out of its current mess.
From an economic standpoint, solid restructuring needs to be undertaken as the underlying issue of Greece’s heavy debt burden is still unresolved. The market gave an immediate cheer by sending most markets upwards straight after the election win. However, any relief of this sort will only be short-term, as the hard work has only just commenced.
The austerity measures to reduce government debt from 160% to approximately 120% of GDP by 2020 will be difficult at best. Greece needs its citizens to get back to paying their taxes and for the government to be frugal and disciplined at the same time. Only time will tell if Greece will continue to hold onto its spot inside the Eurozone.
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