Despite rumors of an improvement in the climate of the current Brussels Group talks, the possibility of the Greek government coming to an agreement with its partners remains rather small. On Monday the American Ambassador in Athens issued a clear warning to the Greek government regarding the potential early “prison release” of Savvas Xiros on humanitarian grounds, further isolating Greece diplomatically.
The international correlations are not expected to improve for Greece any time soon; the new coalition government that will likely emerge in Finland after last week’s elections is going to adopt a hard stance on issues from which Athens has declared it will not back. Similarly an upcoming election in Germany may put the pressure on the Christian Democrats, as the Eurosceptic right-wing AfD party is on the rise and popular opinion in Germany is against a new financing agreement for Greece.
On the domestic front, the decision to amass all available funds of the general government bodies in the Bank of Greece, in order to be able to pay wages and pensions in May, has sparked reactions and some controversy. Many international banking and investment groups estimate that the political, social and financial developments in Greece will urge early elections by June. Most estimations suggest that the chances of early elections are over 50%.
The early elections appear to be unavoidable for three reasons. The first is that the Prime Minister may be unable to pass through Parliament any agreement he comes to with Greece’s partners. Alternatively, a small- or large-scale credit event may reverse the popular support that the SYRIZA/ANEL government enjoys. Finally, some estimate that the government may wish to sign a new, complete agreement with the country’s creditors before a significant amount of government bonds mature in July-August.
