In today’s Greek Elections, the two traditional ruling parties, the conservative New Democracy and Pasok, appear to have gained enough seats in the Parliament to form a Government. The ultra left-wing Suriza party gained the second most votes; but, it has no interest in forming a Coalition Government that would embrace the Austerity Mandate to gain the Bail-Out Package.
But, the question is whether Greece can adequately move back to fiscal sanity. Austerity reduces the tax rolls and a country’s GDP (Gross Domestic Product); BUT, it doesn’t reduce the National Debt.
A key factor that the markets monitor is the ratio of Debt to GDP. Unfortunately, when the Debt remains unchanged and the GDP is decreased, that ratio can be even more alarming.
Personally, I don’t think the troubles in the EuroZone have been settled. There are still four other countries that have taken Bail-Out Packages, and who knows if that group will grow. Money is leaving the weaker countries, their respective Nastional Debts are not going away and the Banks are still undercapitalized. Remember that, for the most part, Total Bank Assets in the EuroZone is roughly twice the GDP of the respective countries. And, if the countries are hurting, how are they going to Bail-Out their Banks?