Obama, economy brace for Greek vote

Global leaders and financial markets will be captivated by a high-stakes political campaign with broad economic implications Sunday, and it won’t be in the United States.

Instead, Greek parliamentary elections set halfway across the world will grip American policymakers and financial leaders as the poll results may dictate whether Greece can remain within the Eurozone, or if its messy exit could throw the global financial system into turmoil.

The White House will be watching the results closely too, as the president’s reelection campaign, thought to hedge primarily on the fate of the economy, could be swept up as well.

The populist leftist Syriza Party is led by Alexis Tsipras, who has basically told voters to call the bluff of Greece’s global backers – reject the austerity package offered by the European Union and International Monetary Fund, nationalize the banks, and effectively dare European leaders to cut off Greece’s lifeline and push them away from the eurozone.

The uncertainty brought by a Syriza win would test the mettle of financial markets, and its aftermath could weigh on the global economy, which is far from resolute.

But perhaps even more damaging for the Obama campaign is that a Syriza win would continue the Greek drama for potentially months longer, as European uncertainty continues to take its toll on a global economy the president would like to see gain steam before his own Election Day.

“This would be very bad news for the Obama administration, there’s no doubt about that,” said Jacob Kirkegaard, a research fellow at the Peterson Institute for International Economics.

While Obama in recent weeks has put more blame on Europe for the struggling U.S. economy, a downturn caused by Europe would surely drag back Obama as well.

The election is the second for Greece in a little over a month after the two parties that hammered out a bailout agreement with the IMF and EU were run out of office by angry voters staring down the years-long austerity package conditional on the international support. The new arrangement of parties and politicians could not form a coalition government, requiring Sunday’s fresh trip to the polls.

Opposing Syriza is the New Democracy Party, led by Antonis Samaras, who has impressed upon voters the need to adhere to the international agreement and do what it can to ensure it remains on the euro currency.

Frustrated Greek voters face a difficult choice in filling out their ballots: support the existing arrangement, which promises stability but also years of economic pain it comes with, or throw their support behind a party vowing a better deal, but with little evidence it can come to fruition.

“Greece has to choose between a very, very bad scenario, which is the scenario it’s in right now…or it can choose a catastrophic scenario,” Kirkegaard said.

He notes that public polling has shown an overwhelming majority of Greek people want to stay on the euro and avoid returning to the drachma as a currency. If Syriza takes control and cannot guarantee that, it is possible the government will collapse, prompting yet another election

Global economic leaders are already steeling themselves for the results, and the havoc they could create. Reuters reported late Thursday that global central bankers were hammering out an agreement to ensure there is enough liquidity and credit to stabilize the financial system if Greece’s election sets off a bout of frenzied trading.

Greece would not be in the clear if New Democracy wins big at the polls, but markets may breathe a sigh of relief at a bullet dodged as Greek voters throw their support behind tough steps to get back to fiscal health.

A win by Syriza could indicate Greece may not be long for the eurozone. If the IMF and European leaders stand their ground and cut off funding to Greece for rejecting austerity, the nation lacks the funds to keep itself afloat.

As if the stakes were not high enough, the race itself is also looking to be extremely close. Greek law actually prohibits polling two weeks before an election, leaving observers largely in the dark about the last-minute ebbs and flows of voter sentiment.

Polls out before the ban showed a mixed bag, with each party grabbing a slight lead in various surveys. The online prediction market, InTrade, gave New Democracy a decided edge late in the week, favoring it over Syriza, giving it a nearly a 75% chance of winning the largest share of the popular vote.

Nonetheless, the political and economic implications of Sunday’s vote on a global scale will make it unlikely Sunday will be a day of rest for many.

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