Greece, the EU and the markets: You can't always get what you want

Economist
January 26, 2015

The Greek voters have opted for a break from "politics as usual"; investors are assuming that "politics as usual" will occur after all (European stockmarkets are slightly higher today). One group is bound to be extremely disappointed.

Alexis Tsipras immediately declared that

Greece is leaving behind catastrophic austerity, it is leaving behind the fear and the autocracy, it is leaving behind five years of humiliation and pain. Your mandate is undoubtedly cancelling the bailouts of austerity and destruction. The troika for Greece is the thing of the past.

But of course, the troika (the EU, ECB and IMF) is still around. At the end of February, the bailout programme is due to expire, and new funding will be needed; would the Greeks really want to borrow at the current market rate (for three-year bonds) of 10.8%? Greek banks are dependent on funding from the ECB (and it will be interesting to see what wealthy depositors do with their money over the coming weeks). So the troika has some strong cards to play.

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