The coming reality – financial markets meet SYRIZA

Lagarde 2Synedrio - Tsipras 2

With fresh national elections in Greece now a real possibility, the financial markets are starting to confront the serious possibility of a SYRIZA government that will reject the politics of austerity. The financial media outlet Bloomberg posted a piece suggesting both caution and optimism for investors: SYRIZA was not challenging private creditors and it could achieve more than previous governments by actually collecting taxes from the wealthy. Take it away Bloomberg….

Tsipras is trying to convince voters exhausted by five years of austerity that he can walk a tightrope between rolling back spending cuts and balancing the budget. While economists question the math underlying his pledge, some investors say the prospect of a Tspiras government isn’t reason to panic just yet.

“If Syriza wins the elections then there might be maybe a short-term repricing in Greek assets, but I don’t think it’s going to be a long-lived weakness,” said Nicola Marinelli, who helps manage 110 million euros ($135 million) of assets at Pentalpha Capital Ltd in London. “It might even be an opportunity to buy.”

A central plank of Tsipras’s plan to keep both voters and bond investors happy is a pledge to honor all Greece’s commitments to the private sector. Debt owned by private investors “doesn’t come into” negotiations aimed at alleviating Greece’s debt load, John Milios, Syriza’s head of economic policy, said in an interview.

Instead, Tsipras aims to persuade some of Greece’s international creditors — fellow euro-area member states and the European Central Bank — that they should accept a writedown on their holdings to bring the Greek government’s debt down to a sustainable level.

“They’ll tell us it can’t be done,” said Milios, a 62-year-old professor of political economy at the National Technical University in Athens. “There used to be a no-bailout clause in the European Union. It didn’t need 10 years for that to fall, it took 10 days,” he said, referring to the rush by European leaders to agree on a Greek rescue package in 2010.

Full report here

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