We Didn’t Need This: Greek Dysfunction Returns!

We’ve got to keep an eye on Greece again now that yesterday’s closure of the public broadcasting company by Prime Minister Antonis Samaras has ignited a political crisis. This has significantly increased the chances of a “no-confidence” vote and snap (or, early) elections. (Everyone remember how markets reacted the last time it happened in May of last year?)

The turmoil centers around the closure yesterday of the Greek national broadcasting company, ERT, and the immediate firing of all 2,600 employees.  The decision, as you would expect, made the unions go crazy—there are calls from the broadcasting employees’ union for a strike and there are signs of solidarity from other unions as well.  But, potential strikes aren’t really the concern. (This is Greece after all; they know how to handle a strike.)

The bigger issue here is that Samaras basically closed ERT unilaterally, without really consulting his coalition partners, the PASOK party and Democratic Left.  They have come out and said they are not in support of this and are working on legislation to replace the decision.

Further complicating things is the fact that the closure of ERT is basically being done to comply with Troika demands of 2,000 public sector job cuts by the end of the summer, which are required for the next tranche of bailout cash.  So, anti-European party Syriza is keying off this to generate support.

Again, the danger here is that the Samaras-led government faces a “no-confidence vote” and fails, causing snap elections, which again opens the door to an anti-European group like Syriza gaining control … and then we have a re-igniting of the European crisis.

We’re several steps away from that now, but the situation bears watching. If there is a no-confidence vote and the government fails, expect that to be a macro headwind for risk assets.