By Kumaran Pillai –
The Greek Elections stunned the world markets yesterday with the minority victory of New Democracy Party. Antonis Samaras, prospective prime minister said, ‘There will be no new adventures or political games. We will work with our European partners and add to our obligations the needed policies for growth and combating unemployment.’
With a weak mandate from the people of Greece, serious questions were raised about the future of Greek economy and the future of the Euro zone. The Greek austerity programme has reduced the economy by 20% since 2007 and with more austerity measures; the future of European Economic Cooperation looks bleak (here).
The New Greek Prime Minister wows good behaviour – an austerity programme and fiscal disciple. However, these promises cannot be kept as Greece is still reeling from its debt crises. Some observers see it as a strategy so that Berlin can foot Greece’s bills.
The socialist government has come into power as a result of the parliamentary elections in France. Their strategy for growth is by taxing the rich and distributing to the poor – a robbing Peter to pay Paul strategy. No growth is going to come from there.
The biggest obstacle to any recovery would require a major overhaul, for Italy to be less corrupt, for Greece to be well behaved and for France, Spain and Portugal to get its act right. It seems like the European Union is in tumult.
The implication for is that the EU will start to draw down on Singapore’s loan commitment should things start to go south in the Euro Zone. The key question is what if Greece, Italy or Spain defaults on the repayment?