The uncertainty following the recent Greek elections looks set to get even worse, after the country’s political leaders are still unable to form a government.
Both the leaders of the new democracy party, Antonis Samaras, and the SYRIZA party’s Alexi Tsipras had failed to form a government, forcing the Greek president to hold desperate talks to avoid the country going back to the polls.
President Papoulias has asked for the four main parties to come to terms and form an emergency government. The issue of austerity measures has split the political spectrum of Greece, with a number of parties speaking out against them whilst others have a pro austerity stance. The Democratic left party and SYRIZA have declared it will not join any pro-bailout parties in a coalition.
Alexi Tsipras refused to attend the talks saying; “Syriza won’t betray the Greek people, we are being asked to agree to the destruction of Greek society. The three parties that have agreed on the policy framework for a two-year government to implement the austerity memorandum have 168 lawmakers in the new parliament,” which has 300 deputies, he said.“They have the majority so let them proceed. Their demand for Syriza to join their planned agreement is illogical.”
“No unity government can emerge, a government without Syriza would not have the necessary popular and parliamentary backing,” said Fotis Kouvelis, head of the Democratic Left party.
Many in Europe fear that if the Greek people do go back to the polls, the parties in opposition to austerity will once again get a large share of the vote, and with no sign that European leaders are prepared to negotiate the austerity terms Greece could end up pulling out of the Eurozone.
Financial institutions have been preparing for the possibility of a departure with many preparing to trade in the Drachma. If Greece does decide to leave it could cause problems for the Euro zone banks which need cash for individuals or companies doing business in Greece. They face the problem of what exchange rate to use and will depend on the laws Athens might draw up for trading its currency. If Greece implemented an exchange rate of one euro to one new drachma, this could impose huge losses on foreign banks because such a rate would not hold on the markets.
Elsewhere the Euro has hit a new three and half year low against the pound as the economic situation continues to deteriorate. It is predicted the pound will continue to strengthen against the embattled Euro.
Anti austerity feeling seems to have also spread to Germany with Angela Merkel s Christian democrat party being soundly hammered at the polls yesterday. Anti austerity feeling has grown throughout Europe and Merkel will have to hope the German economy remains strong if she doesn’t want to lose her job in the national elections in 18-months time.
The Pound to Euro exchange rate is currently trading at 1.248
The Pound to US Dollar exchange rate is currently trading at 1.607
The Euro to US Dollar exchange rate is currently trading at 1.286
The Euro to Pound exchange rate is currently trading at 0.798
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