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European Debt Crisis

New general election on the way in Greece

Stephen Beard May 15, 2012

David Brancaccio: Political parties in Greece have failed to forge a coalition, meaning a new general election is on the way in Greece. Will the country keep to its budget promises that are a condition of the European bailout? That’s just one of many questions roiling markets especially in Europe today.

Joining us live from the Marketplace European desk in London is Stephen Beard. Hello Stephen.

Stephen Beard: Hello David.

Brancaccio: So Stephen, what does all this mean for the Greek debt crisis? I mean, will the new elections, do you suppose, help or hurt to resolve it?

Beard: It’s too much democracy, the cradle of democracy. No, it’s just more uncertainty — another month of uncertainty. And the particular fear is that Greece could now be headed for a messy and disorderly default, because the left-wing group Syriza — which opposes the austerity conditions attached to the last bailout — is riding high in the opinion polls. It could emerge as the largest single party in the next election. And if it formed a government and then refused to carry out the bailout conditions, Greece could be denied any more EU-IMF money and could run out of cash and default.

Brancaccio: All right, then would that necessarily mean that Greece would then exit the eurozone? Pick back up the drachma?

Beard: Well, it might well. We don’t know for sure; this is uncharted territory. It may well be impossible for Greece to continue, for example, to receive funds from the European Central Bank if Greek government bonds are worthless. But anyway, investors reckon the chances of a Greek exit are much higher if there is a messy default.

Brancaccio: And what do you think for the wider world economy? This is not just about Europe.

Beard: No indeed. But again, we don’t really know what would happen if there were a Greek exit from the euro. But it could potentially have dire consequences for the rest of Europe. Certainly, the euro could unravel, and if that happened, that would certainly hit global financial markets.

Brancaccio: Marketplace’s Stephen Beard in London. Thank you very much.

Beard: OK David.

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