Financial Times
May 11, 2012
Everyone is back to a big game of “what if?” Greece is back at the centre. But despite asking the question, the market seems rather too confident of a positive resolution.
Ever since the US credit bubble began to deflate five years ago, moments of truth have come when markets have confronted politicians, and when politicians have confronted their electorates. This week was dominated by news that François Hollande had defeated Nicolas Sarkozy as president of France, and by the astonishingly inconclusive elections in Greece. They gave nobody a mandate, but did firmly remove the mandate from the old-line parties that favour accepting the onerous terms on which the country was bailed out earlier this year.
The latter plainly raises the chance that Greece will default and exit the euro, while the former greatly complicates the politics of containing the consequences of this potentially disastrous event. These elections could provide the “forcing mechanism” that forces the continent’s politicians to sort out a sensible basis on which the eurozone can continue.
But first, we need to know: will Greece leave the euro? And what happens next if it does?
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