Greece’s parliament will be dissolving by tomorrow after Greek Prime Minister Antonis Samaras failed on Monday to have his presidential candidate, Stavros Dimas, endorsed with enough parliamentary votes to avoid a snap election, rekindling concerns about Greece’s ability to repay its creditors and follow through with imposed austerity measures and fiscal reforms that are mostly unpopular across Greece where economic growth is lacking and unemployment remains high.
Despite last minute efforts to convince Greek lawmakers to support his candidate Stavros Dimas, Prime Minister Samaras was unsuccessful on Monday and only received 168 of the 180 votes needed to endorse Dimas and avoid a snap election that is now scheduled for January 25th.
Today the euro dropped to lows not seen since August 2012 while the yield on Greece’s 10 year bond has spiked to over 9 percent, a level that is unsustainable in the long term, amid rising concerns that Greece’s snap election on January 25th could produce a political outcome that sets Greece in direct opposition to meeting its prior commitments to embrace austerity reform measures that were imposed from its creditors to help the indebted country to become fiscally restructured and more in line with its northern EU neighbors.
Recent opinion polls across Greece show that leftists party Syriza is poised to gain the majority of votes in the event of a new snap election held in early 2015.
Syriza is fundamentally opposed to accepting the bailout terms of the European Union and the IMF that contains belt tightening austerity measures along with fiscal reforms.
In May Syriza Party Leader Alexis Tsipras had some harsh words to say about Greece’s imposed austerity measures even despite a more recent moderate tone about the need for Greece to stay in the 18 member currency bloc and negotiate and end to the financial bailout.
“Austerity has led to the creation of political monstrosities” Tsipras said before calling for write-downs on Greece’s €240 billion ($290 billion) debt burden.
Presently, Greece is facing repayments of €5bn during the beginning three months of 2015.
The so called “Troika” consisting of the ECB, EU, and IMF have only been willing to extend financial support to Greece through the end of February.
Any restructured offer to help Greece will set a new precedent and may also have to be offered to other countries whose governments accepted bailouts and have high debt levels.
Fiscal discord in Greece over following fiscal austerity reforms may also result in more resistance from northern countries such as Germany for undertaking additional monetary stimulus measures by the European Central Bank to purchase the sovereign debt of other member countries, most especially in southern Europe.
The ECB just issued a statement today about Greece’s failed vote in the parliament to endorse candidate Dimas and avoid a snap election.
“It is now for the Greek electorate to decide about the future composition of the parliament and the government. We will not interfere in or comment on this democratic process.
We will wait for the views and suggestions of the Greek authorities on how to best proceed with the review, and we will discuss this with the European Commission and the IMF” the ECB wrote.