Europe Economy

Greece Euro Exit Rests on Shoulders of Swing Voters


The Greek electorate has already bloodied the nose of its centrist parties, and now the number of undecided voters could help determine whether it remains in the euro zone.

A man holds a placard bearing the Greek flag.
Anne-christine Poujoulat

Recent polls show a swing to the right-leaning parties in Greece, ahead of a second election in June. May’s election finished with a hefty swing to the left – but no party able to form a coalition government.

The next election is increasingly viewed as central to Greece’s future within the euro zone. Parties which oppose austerity plans aimed at keeping the country within the single currency region have benefitted, despite the majority of Greeks consistently backing continued euro membership in polls.

While - the leader of Greek left-wing party Syriza who could be a potential kingmaker in the next election - has embarked on a series of meetings elsewhere in the euro zone, he is still a relative unknown internationally.

“The very high number of undecided voters in Greece are key,” Tina Fordham, senior global political analyst at Citi , told CNBC’s “Squawk Box Europe” Monday.

“It’s possible for populations to hold two opinions at the same time and that’s what we see in Greece. The political center is eroding and new alternative parties are gaining steam.”

Despite the G8 meeting of leaders from some of the world’s biggest developed economies indicating that many world leaders are turning from austerity towards growth, international focus is likely to remain on austerity in Greece whoever gets elected.

“I don’t think the Greek public should expect much softening from Germany or the troika [international lenders to Greece made up of the International Monetary Fund, the European Union and the European Central Bank],” Fordham warned.

'Grexit' Before Election?

Greece could exit the euro even before June 17th’s election, following substantial capital flight from the country as wealthy Greeks take their money out of the country, according to Brendan Brown, author of Euro Crash and head of research at Mitsubishi UFJ Securities International.

The question of a Eurobond – a common, euro-denominated bond issued by all the countries in the euro zone - has arisen again this week after newly-elected French President Francois Hollande pledged to make it a key discussion point at Wednesday’s euro zone summit.

Many believe that the creation of bonds issued by the euro zone would help back up struggling countries like Greece – but some of the more secure countries could resent the extra burden. German Chancellor Angela Merkel is one key opponent of the proposal, ahead of elections in her own country later this year.

“German voters do not want to have huge tax liabilities for the rest of time from funding the EU sovereign debt crisis,” Brown said.

He argues that the European Central Bank’s mass liquidity operations in December and February – known as Long-Term Refinancing Operations, or LTROs - are essentially a euro bond.

“They’re everyone’s liabilities and essentially the German and French taxpayer will end up paying for them,” Brown said.

Fordham said she didn't expect to see Eurobonds being approved soon, but there were other measures that leaders could take.

“There’s a new dynamic between Merkel and Hollande. Merkel will soften her position on growth, but I don’t think she’ll be endorsing Eurobonds just yet,” she said.