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Observations on the Greek Election and the European Central Bank – Part Three

Jan 28, 2015

German Chancellor Angela Merkel has insisted that Greece abides by existing eurozone austerity measures and reforms designed to "foster Greece's continued economic recovery". 

"That also means Greece sticking to its previous commitments," said Mrs. Merkel's spokesman.

Berlin also fears that the victory for Syriza will signal the beginning of a populist revolt across Europe and victories for parties such as France's far-right Front National.

"I am delighted at this massive democratic blow the Greek people have delivered to the EU," said Marine Le Pen, the leader of the Front National party. "This is the moment euro-austerity and the constraints imposed to save the euro go on trial."

The International Monetary Fund (IMF) has issued a statement pledging its continued financial support for Greece. In the statement, IMF managing director Christine Lagarde said:

We stand ready to continue supporting Greece, and look forward to discussions with the new government.

However, David Cameron has conspicuously failed to congratulate Alexis Tsipras on his election as the new radical Left leader of Greece because of fears that he will “increase economic uncertainty across Europe”.

“What the Greek election will also show is that there are some warning signs in the global economy, including in the eurozone, less rapid growth from the developing economies. These point to the importance of sticking to our economic plan which we are delivering,” he said.

Downing Street is concerned that Mr. Tsipras could become a rallying figure for opposition to the economic reforms that Britain, the International Monetary Fund and Germany believe are necessary to turnaround the eurozone.

Mr. Cameron and Angela Merkel fear that France, Italy and other south European countries will use the Greek result as an argument to water down or dodge austerity and eurozone spending rules, tipping the fragile global economy into recession.

“Spending more on public finances is not proven to be driving growth in Greece or indeed in other European countries so it needs to continue to deal with its deficit and it needs to meet its international commitments,” said a Downing Street spokesman.

For more information, please see Part One or Part Two.

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Timothy Speiss

Timothy Speiss is a Tax Partner in the Private Client Services Group and Vice President of EisnerAmper Wealth Planning LLC. He chairs our Asia Practice and is a member of the firm’s community service group, EisnerAmper Cares.

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