The euro dropped briefly to an 11 year low against the dollar as the radical left-wing party Syriza won a majority in Greece’s national elections.
Syriza’s leader, Alexis Tspiras, has spoken out against the damaging effects of austerity on the country, saying that he will reverse cuts and renegotiate the terms of Greece’s bailout package, which saw an emergency €240bn lent to the country by its European counterparts.
Germany, which led the bailout, is particularly unsympathetic to the party’s rhetoric. There have been some concerns that an overzealous Syriza party could be pushed out of the Eurozone altogether to prevent currency contagion, should their anti-austerity measures fail to work.
However, many leading treasurers have played down this risk. Speaking at the Treasury Strategy quarterly briefing earlier this month, Deborah Cunningham, Chief Investment Officer at Federated Investors described a Greek exit as potentially too catastrophic to be a probable threat, saying: “we don’t rate the likelihood very high.”
Peter Matza, Engagement Director at the Association of Corporate Treasurers (ACT), agreed, adding that “if you have business with Greece, you probably have your beady eye on it,” but the probability was low to be a major concern for most treasuries with European operations.
The anti-austerity movement in Greece has been violent and prolonged, with riots breaking out after the crash in 2008 and then intensifying between 2010 and 2012. Declining wages and living standards coupled with crippling debt and sales of public assets mean that many Greeks cannot see economic recovery in sight, with or without harsh austerity measures.
Meanwhile, similar sentiments in countries such as Spain and Portugal means that, across the continent, the progress of Syriza’s negotiations will be followed closely by politicians and activists alike.
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