The question regarding whether or not Greece will stick with the Eurozone got at least a short-term answer after the country's elections Sunday, when the conservative, pro-bailout New Democracy party narrowly won the crucial vote.
But Greece's trials and tribulations are far from over, and the relief is temporary. Concerns are increasing over the global cost of a Eurozone bailout package as the mounting woes in Spain and Italy persist.
Citizens of Greece are clamoring for change, but many recognize that the election results are no quick fix. There was no cheering in Greece and global markets reacted cautiously following the vote.
Borrowing costs across Europe rose with Spain taking the lead. The yield on Spain's 10-year bonds spiked to a euro-era high of 7.18%. A reading above 7% raises a red flag that a nation may be approaching the need for a bailout.
While the Greek election results staved off a calamity, they failed to fix the wider problems facing Greece and its struggling neighbors.
Moody's Analytics' chief economist Mark Zandi told USA Today, "We dodged a bullet, but they've got more bullets coming."
The Eurozone Bailout: A Long Road Ahead
Greece's election was the easy part of what's ahead.
Now, the conservative New Democracy party must deal with a disconcerted middle class who is angry over wage and job cutbacks, while many political and business leaders have been spared the austerity pain. For more than two years, budget cuts and tax hikes have put the brakes on Greece's economy and propelled 30% of the population below the poverty level.
New Greek democracy leader Antonis Samaras must now begin talks to find partners to form a new government, and negotiations on that front will be difficult. Samaras axed the idea of meeting with second-place finisher and leader of Syriza, Alexis Tsipras, who might just be sitting back and waiting for Samaras to fail.
Samaras acknowledged that Greece's bailout terms were too stringent and has voiced that he wants to rework them.
In a post-election statement, Samaras said, "We will work together with our partners in Europe in order to supplement the current policy mix and growth enhancement policies. We are determined to do what it takes and do it fast."
While Samaras won, he doesn't have everyone's faith that he'll be the fix Greece needs. Some economists have likened the ailing Mediterranean country to a ship with a hole in its hull that keeps taking on water.
Eventually, regardless of who is serving as captain, the ship will sink.
Political analysts say the next Greek government is certain to be frail. One commentator told NPR that the leftists Syriza, with the anti-austerity wind in its sails, will be a powerful opposition force.
The Eurozone's Future
Greece is just one thorn in Europe's and investors' sides.
Moody's Zandi said that while the Eurozone will take 10 years or more to correct its financial problems, holding off the euro's imminent collapse will keep the U.S. economy from falling into recession by the euro's misery.
"It doesn't end the Greek crisis," Peter Cardillo of Rockwell Capital told USA Today. "It may take some pressure off, and now the market will look to the European Union summit late this month to come up with concrete measures to take more pressure off."
Looking forward, future developments will hinge on whether European Union leaders are willing to renegotiate the bailout package terms. Early indications are not very persuasive. Germany has insisted that Greece employs the bailout agreement and any kind of compromises are apt to be restricted.
While German officials view Greece's election results as a victory for their austerity-first policies, it's bothersome that the majority of voters, some 55%, cast their ballots for parties that resist the bailout conditions.
While the New Democracy claims victory, it may not be a sweet one. The Greek election results are not a game changer. It's still "game on," and the global effects of the Eurozone bailout saga remain unknown.
Related Articles and News:
- Money Morning:
5 Ways to Avoid the "Spailout" and Sleep Soundly at Night
- Money Morning:
President Obama Urges Action Amid Recession 2013 Fears
In Greece, The Election May Have Been The Easy Part
- USA Today:
Greek election winner calls for broad coalition
World market rally loses steam