Jeremy Hobson: The big story this morning is Europe, and we’ll start our coverage with the mood in Greece ahead of this weekend’s crucial elections.
Christos Karanatsis: I think whichever way, in and out of the euro, things will go the way there are about to go — which is they will become worse for the next probably three to five years.
Anna Maria Hagiafrati: I’m very angry against our politicians and against Europe in general because I think that we didn’t deserve this situation.
Hobson: That was 55-year-old Anna Maria Hagiafrati and 32-year-old Christos Karanatsis speaking with the BBC. For some analysis, let’s bring in Chris Low, chief economist with FTN Financial. He’s with us live here in the studio. Good morning.
Chris Low: Good morning.
Hobson: So, Chris, what are your main concerns as we head into this weekend’s election, or re-election, in Greece?
Low: Well, yeah. I mean everyone is at least thinking about the Greekend, right? As we go into this. So, main concern I think, is we come out of the election on Sunday with another hung Parliament. There are three parties, they are all polling strong; I don’t think they can form a coalition.
Hobson: And what happens if that happens; if there’s no clear winner in the election?
Low: Well, you know it’s interesting. Already, Europe has cut off aid to Greece to the point where they can only afford to make the interest payments on what they owe for aid to Greece. So I think at that point, Europe sort of washes its hands, and starts trying to move them peacefully to the exit.
Hobson: Moving Greece to the exits. What happens next, then, with countries like Italy and Spain that are sort of on the brink themselves?
Low: Well, that’s the point. The idea would be to move Greece out easily so that they can bring all their resources to bear to prop up Spain and Italy.
Hobson: What about the United States in a situation like that. We’ve been fearing what might happen if there is a Greek exit all along, but what happens to our economy if we get thrown into that kind of uncertainty next week?
Low: Substantial risk of a small economic impact. We don’t export much to Europe. But a small risk of a substantial financial impact. The key is going to be how they deal with financial institutions in Europe and whether they provide support.
Hobson: Now Chris, are we going to regret this? If we look back, obviously there’s a big price of keeping Greece in the Euro if it can’t pay its debts, but aren’t we going to look back at this and say we should have kept them in there.
Low: Yeah, the word everyone’s using is ‘Lehman moment.’ Is this the ‘Lehman moment’ for Europe? I think everyone’s hoping it’s more like the ‘Bear Stearns moment’. It’s disruptive but we can move on from it. And that’s why everyone in Europe is focusing on propping up financial institutions.
Hobson: Chris Low, chief economist with FTN financial, thanks as always.
Low: Thank you.
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