Recently the European Central Bank (ECB) took an aggressive step to curtail the deflationary trend of the Euro. The ECB decided to initiate what they termed a ‘quantitative easing’ plan; the plan involved funding in excess over 1 trillion Euros.
With hope of that working, the ECB can know turn their attention back to Greece and the worry about the country’s just finished elections. As expected, the Syriza party wona majority of the vote and Alexis Tsipra was elected Greece’s new Prime minister. What worries the ECB is that the Syriza party ran based on an anti-austerity platform.
One of Syriza’s campaign promises was to aggressively lobby Eurozone and the ECB to reevaluate the amount of their debt holdings to Greece. The new government then will look to increase spending in an attempt to promote job growth.
Why is the ECB worried about this? There is a big fear that if Tsipra and the Syriza party get their way, then it could be enough to offset any gains made through the quantitative easing plan and send the European economies spiraling downward again. The results of the Greek election have definitely generated a feeling of uncertainty in global markets and have given rise to a lot more volatility in the markets at the same time.
The positive part of the election results are that Syriza has stated it no longer wants to leave the European Union; there was a big fear about this three years ago when Greece’s struggling economy severely faltered. Since that time and their subsequent bailout, under the terms of the agreement, Greece has been subject by periodic inspections by the International Monetary Fund (IMF), the European Union commission and has also been subjected to ECB reforms brought on by the urging of Germany.
Despite their new ambitions, it will be hard for Greece’s newly elected government to satisfy its campaign promises and at the same time ease tensions with the IMF and Europe.