Greece to stay in the Euro and the Euros

18 June, 2012

Robin Haynes

The results of Greek parliamentary elections look like a victory for the pro-bailout New Democracy party – with far reaching consequences for the global economy as Athens will now be likely to accept the austerity measures handed down by the EU, allowing the country to stay in the single currency.

In recent weeks it had looked like anti-austerity parties may have made more of an impression at the elections, which would have led to a likely unprecedented Greek exit from the single currency. Now, New Democracy should be able to build a majority coalition with the socialist Pasok, benefiting from a rule which gives the leading party 50 extra seats in the 300-seat chamber.

This could mean we see some strength for the Euro, giving lower exchange rates for sending payments from the UK to the single currency area. Stock markets around the world have risen on the news, and the Euro may not be far behind, once a coalition government is officially formed. The Pound has fallen 0.75c against the Euro since Friday night, and is stable against the US Dollar, against which rates have improved somewhat in the last week.

After Greece’s surprise victory over Russia kept them in the European Championships at the weekend, it looks like New Democracy’s surprise victory, may also keep Greece in the Euro – for the foreseeable future at least.

Elsewhere this week, we have no major data due until tomorrow, with monthly UK consumer inflation which will be important for the Pound, as will Wednesday’s Bank of England minutes and unemployment rate. The G20 meeting also starts today.