Greek election means disaster averted, not resolved
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Jeremy Hobson: The good news is we’re not talking about a financial panic this morning. And that’s because Greece is likely to stay in the euro for now. The pro-austerity, pro-bailout party New Democracy won yesterday’s elections — narrowly beating the anti-bailout party. Here’s the leader of the New Democracy, Antonis Samaras.
Antonis Samaras: Today the Greek people expressed their will to stay integrated with the euro, remain an integral part of the eurozone, honor the country’s commitments and force their growth.
Well for analysis let’s bring in Julia Coronado. She’s chief economist with the investment bank BNP Paribas and she’s with us live as she is every Monday. Good morning.
Julia Coronado: Good morning.
Hobson: So I guess a “Gre-lief” as I said, perhaps for some in the rest of Europe. What does all this mean for the euro debt crisis?
Coronado: Well, as you said, we’ve averted disaster. So we’re not talking about Greece leaving the eurozone this morning. But it doesn’t really resolve the fact that Greece is on a very, very long and difficult road. So that question, while it’s been pushed aside for the day, is not completely off the table. And there’s still a lot of negotiating that needs to happen and it’s not going to be easy.
Hobson: What does this mean for us here in the United States. Obviously we’ve been talking about headwinds coming from Europe. Does this help us at all, our economy?
Coronado: Probably not much. We’ve already been dealing with our own issues with another under-performance with the U.S. economy in the first half of the year. The data has been pretty weak — manufacturing, retail sales all seem to be slowing. The Fed is meeting this week and they need to decide whether the U.S. economy needs another jolt. I think that they are going to decide that they need to add a little more stimulus to get our own economy going.
Hobson: Now, this Greek crisis has sort of been building for several weeks as we led up to this election over the weekend. Have any lessons been learned, do you think, going into this so that we just don’t have crisis after crisis in Europe?
Coronado: Well, I would like to say that we have. What I hope the European policy makers are learning from the fact that each of these developments brings a shorter and shorter period of relief in financial markets, is that you can’t just keep kicking the can down the road. Ultimately we need to know whether Europe has the will to stand together and form a fiscal union like the United States has or something at least somewhat similar. Or do they not? It’s a very, very difficult decision for these countries that all have different cultures and languages and traditions to make to give up basically some of their own control for the greater good of the whole. But that’s ultimately what needs to happen and each of these little relief periods, again, they’re just not lasting.
Hobson: Julia Coronado, chief economist with the investment bank BNP Paribas, thanks as always.
Coronado: It’s a pleasure.
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