A common sentiment seems to be that while this is better than the alternative-a victory for Syrzia-the anti austerity radical leftist party-it still has hardly solved it all. A lasting solution is still far from off.
From my standpoint I have mixed feelings about it. If I were Greek I'd have voted for Syrzia as I'd be sick of austerity. Whether or not that would have been a better solution for the Greeks is debatable-it seems to be both solutions offer lots of pain in the short term. The plus side of Syrzia is that at least the Greek people could feel that they've taken matters back into their own hands rather than being at the beck and call of Germany.
Then too, it's arguable that if Greece had left it would have been to their longer term benefit in the same way that Argentina benefited from leaving the dollar in 2002.
So I'm not sure that this is the best choice for the Greek people themselves. though both choices are far from glamorous. While Morgan Warstler over at Money Illusion was having orgasms over the Greeks "bending" the political will for austerity in Greece is even more fractured now. Even if Syrzia did not win a majority they were close-over 27% against 29% for the conservative Free Democracy party; FD only has the power through a coalition with the pro austerity Socialist party who got just 12%.
With a major presence in parliament Syrzia will have a good deal of ability to make things difficult in Congress. These austerity votes have already been getting very tough-as we saw by for example former Socialist Prime Minster Papendreou's resignation last year. It will only be harder now. Free Democracy hardly has an austerity mandate. In the end to the extent you fully trust the vote the Greek people chose very narrowly to remain in the euro-they basically want to stay on the euro without austerity.
You wonder if in the future the EU will give them some ability even to spread it out more-I heard a proposal is that maybe austerity will be allowed to pursued a little differently in the future. In any case this is still far from a comprehensive solution which is why the market is dragging.
"A relief rally that gathered steam on Monday lasted less than an hour in Europe as investors weighed a Greek election result seen as reducing the risk of a euro exit against concerns over Spain's high levels of debt."
"Analysts told CNBC.com the collapse of the relief rally was hardly a surprise, and blamed at least four different factors. They singled one out in particular: lack of leadership in Europe."
"While it was widely acknowledged that markets remained concerned about Spain and the size of a bailout its banking system might need, the threat of contagion to Italy and Greece’s ability to form a government and keep to its bailout commitments, it was the lack of decisive action by European leaders that was blamed overall."
" Unfortunately [the Greek election] news yesterday was better than the alternative, but was nowhere close to an actual solution to Greece and to the euro zone as a whole,” said Neel Kashkari, head of global equities at Pimco on CNBC’s “Squawk Box.” “I’m afraid we’re going to continue to see half measures…but probably nothing to actually quell the crisis once and for all. We’ve seen two years of extreme volatility; it’s likely to see extreme volatility for the near future.”
The main thing the election hopefully accomplished was slowing down the withdrawal from Greek banks. Again, I'm not necessarily a fan of the outcome-from the standpoint of the Greek people themselves-yet it may be beneficial in the long term for the US-and so for President Obama's re-election hopes. That's why I was sort of divided going in. It may be that the EU and Germany will have to temper anyway with France driving the bus for more pro growth policies.
Ironically the market selloff actually has started to mitigate now due to good US news:
"Stocks pared most of their early losses Monday after homebuilder sentiment rose to its highest level in five years and following Greek election results over the weekend, but worries over Spain continued to keep investors on edge."
Ironic that what caused this whole mess now seems to finally be showing some signs of repair-the US housing market. The problem is Europe at this point. If they can in some way prevent the barn from being totally emptied the US left to itself can probably pull through. The question is can we pull through if it is totally emptied? It's for this reason that investors are again looking to the Fed for solutions.
Many feel that it's the Fed not Greece that needs to boost the euro this week.