'Brexit' and 'Grexit' risk collision in May

Thursday, February 5, 2015

Europe's political risk will be highest in May, just as the UK general election raises the prospect of 'Brexit'

Impacts

  • Greece will likely win some debt relief, but no write-down.
  • Germany will come under widespread pressure to do more to stimulate euro-area growth.
  • Greece's talks with its creditors could last through May, when it will face a cash crunch, and 'Grexit' risk will be at its highest.
  • Also in May, UK voters will decide whether to re-elect the Conservatives -- whose referendum promise risks 'Brexit'.

Conclusion

The election of the anti-austerity Greek party Syriza has raised the threat of a showdown between the euro-area's most indebted member state and its 'troika' lenders (the ECB, the EU, the IMF).

Nor is this the only high-stakes contest in 2015: the UK general election could produce a government that may take the country out of the EU, while Spain's general election could see new leftwing party Podemos upset the country's two-party consensus - and challenge Germany's insistence on austerity.

References

see GREECE: Syriza must wrest some new deal from lenders - February 4, 2015

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