In a perilous replay of the Spanish bank "bailout", the proxy for bailout sentiment, the EURUSD pair, was up 61 pips to just under 1.2700... and that's it. Naturally, if the world suddenly thought Europe was "fixed", Spain notwithstanding, one would imagine the reaction by the FX market would be just a little more invigorated than merely confirming that what is playing out (namely the lack of a definitive Greek government) has already been priced in. And yet here we are...
As the WSJ reports:
"The head of Greece's radical left Syriza party conceded defeat Sunday after closely fought national elections that were seen by many as a de facto referendum on the country's future in the euro zone. With more than half of the vote counted, the conservative New Democracy party--which supports the European-led bailout needed to keep Greece in the euro zone--was leading with 30.3% of the vote against 26.31% for the antiausterity Syriza party. Speaking in a nationally televised statement, Syriza leader Alexis Tsipras said he had called his rival--New Democracy party chief Antonis Samaras--to congratulate him on his victory. A little while ago, I called Mr. Samaras and I congratulated him. He now has the ability to form a government," Mr. Tsipras said"
"In his remarks, Mr. Tsipras said his party would continue to "be present in developments in the position of the honorable opposition," implicitly ruling out any cooperation with New Democracy in a cross-party coalition."
In other words, anyone hoping that Greece will promptly form a pro-bailout government will likely be disappointed, especially if Pasok was not merely posturing and indeed demands Syriza, which said it will do no such thing, form a coalition government. On the other hand, there is nothing quite like have a coalition government between the two parties that brought Greece to its knees in the first place, to fix the country... Somewhat like when all the central banks ganged up and fixed the world last time around in November.
To Germany, the vote, has one meaning: that Germany won the game of chicken. From Reuters:
"The German Federal Government would consider such a result a decision by Greek voters to forge ahead with the implementation of far-reaching economic and fiscal reforms," Schaeuble said in a statement.
Schaeuble added that New Democracy Chairman Antonis Samaras had told euro zone finance ministers in February he was committed to the bailout programme.
"This programme, developed and agreed with Greece, has only one goal: to put the country back on the path of economic prosperity and stability. This path will be neither short nor easy but is necessary and will give the Greek people the prospect of a better future," he said.
Europe, of course, is completely oblivious to the German stance, and instead sees itself as having gained the upper hand, insloventy and lack of money notwithstanding. From the Consilium, or rather, from Cabo, Mexico.
Los Cabos, 17 June 2012
Satement by Presidents Herman Van Rompuy and José Manuel Barroso on the result of the Greek elections
The Greek people have spoken. We fully respect its democratic choice. We are hopeful that the election results will allow a government to be formed quickly.
Today, we salute the courage and resilience of the Greek citizens, fully aware of the sacrifices which are demanded from them to redress the Greek economy and build new, sustainable growth for the country.
We will continue to stand by Greece as a member of the EU family and of the Euro area. We look forward to work with the new government and to support the continued efforts of Greece to put its economy on a sustainable path.
The second economic adjustment programme agreed between Greece and the Eurogroup is the basis upon which to build to foster growth, prosperity and jobs for the Greek people. We stand ready to continue assisting Greece in achieving these goals.
Finally, from a capital markets standpoint the only thing that should matter is that there will be no coordinated central banker intervention tonight, or tomorrow, as we explained on Friday. That is of course, assuming New Democracy does somehow manage to cobble together a coalition government with either the Neo-Nazis or the communists, if indeed Pasok is out.
Our only question: will the record short rally in the aftermath of the Spanish "bailout" be of shorter or longer duration than that of the Greek "resolution." We would take the latter.