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In an election watched closely throughout Europe, Greece's left-wing, anti-austerity party won a decisive victory over the ruling center-right party. The impact of today's vote in Greece is likely to affect people around the world. For more, John Authers of the Financial Times joins Hari Sreenivasan.
Today's vote in Greece is likely to affect people around the world.
To help understand how, we are joined now by John Authers. He is the senior investment columnist for The Financial Times.
So, what does it mean if the Syriza Party takes control of Parliament, whether it's an absolute majority or not?
JOHN AUTHERS, Senior Investment Columnist, The Financial Times:
It means that they now have a mandate to do what they have been threatening to do for several years, which is attempt to renegotiate the terms of the bailout, in which they — which they received from the European Union some years ago.
Plainly, that then opens the issue, if they fail to negotiate new terms, that they leave the Eurozone, for which there is no precedent.
And how does the E.U. feel about renegotiating a bailout that they begrudgingly accepted a few years ago and have had to make modifications for over the last couple of years?
Well, markedly unenthusiastic, as you would expect.
The line that came across to The Financial Times' reporters at Davos last week was a fairly clear one, that they feel they have done enough for the Greeks.
The Greeks may still have 175 percent of their GDP as their overhanging debt, but they — the other Europeans say, well, we have still given them a lot of generosity already. We have negotiated the debt down. We have extended the terms.
It looks as though there would be a line in the sand when it came to what is known as a haircut, to actually reducing the amount of debt outstanding. There may well be a lot of wiggle room in terms of extending the debt still further into the future.
So, what if the E.U. says, OK, fine, we will give you this haircut, but you have to leave, or there's actually members in this new party that say, we should leave the E.U. altogether?
And that's — either way, it is a precedent.
Yes, it is.
Plainly, the briefings, again, the belief out there at the present — present is that that would be just about survivable, if you look at how the bond markets have behaved in the last year or so, back in 2010, when the Greek crisis first — first blew up.
We now see that the Spanish debt and Italian debt is signaling almost no risk of leaving the euro, no risk of defaults.
Two-and-a-half years ago, the last Greek election, they were signaling real panic over the possibility that — that that could happen.
So there is a belief that the rest of the Eurozone can carry on. But the critical thing is, there no so precedent for this up until now.
The whole point of the Eurozone is that — is that you are so totally committed to this currency that there is no way you can leave.
Once one country has left, it becomes far more possible for others to leave.
Before that departure point, does it embolden more parties on the far left in other countries?
I mean, the mere fact that Syriza has finally — that this looks as though we have finally got the point — got to the point where one of the populist alternative parties has actually managed to take power, we have seen the rejection of the incumbent parties in all the crisis-hit countries since the — since the crisis took hold.
But this is the first time one of the truly new wave populist parties have taken hold. That will embolden the new left-wing alternative parties elsewhere very, very much.
Obviously, a lot depends on how much Syriza manages to do with its opportunity.
So what happens to the financial markets around the world? Has this uncertainty already been baked in, or are we likely to see some more volatility?
My suspicion is that this will probably cause some concern in the morning, simply because Syriza has done even better than the more optimistic projections as time went on.
That said, we are at a position now where a large number of the other countries which would suffer from contagion have had much lower rates at which to borrow for quite a while.
They have been able to defend themselves quite nicely against this situation.
Yes, volatility will increase. This will worry people, until such a point as negotiations emphatically break down or the Greeks actually go through with a default, at which point that's a very serious event, arguably not a Lehman Brothers event, but a very serious event.
Until such a point, I think it just means that people get a little bit more nervous. I doubt there would be any major impact on the market.
All right, John Authers of The Financial Times, thanks so much.
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