Greece, one the most troubled nations in the eurozone, has elected a radical left-wing political party named the Syriza that’s against the austerity measures placed on Greece by the “troika”—that’s the European Central Bank (ECB), the European Union (EU), and the International Monetary Fund (IMF).
Syriza wants to renegotiate the terms of the country’s bailout and imposed austerity measures with the ECB, the EU, and the IMF. The leader of the Syriza party, Alexis Tsipras, said, “The verdict of the Greek people ends, beyond any doubt, the vicious circle of austerity in our country. The verdict of the Greek people, your verdict, annuls today in an indisputable fashion the bailout agreements of austerity and disaster.” He added, “The verdict of the Greek people renders the troika a thing of the past for our common European framework.” (Source: Toronto Star, January 25, 2015.)
Wakening Anti-Austerity Protests Across Eurozone?
This victory of an anti-austerity party in Greece is like words of encouragement for other similar parties that have grown their roots in other troubled eurozone countries, like Spain. I fully expect other anti-austerity parties to get a stronger hold in the eurozone after this victory in Greece.
The leader of Spain’s the Podemos party, Pablo Iglesias, said, “The Greeks are going to have a true Greek president and not a delegate of German Chancellor Angela Merkel, (a president) who will put the interests of his country and his people first.” He added, “We will work to support Syriza but we will also work in Spain, acknowledging that it is a different economic and political reality.” (Source: The Telegraph, January 26, 2015.)
What’s Next for the Eurozone?
From an economic point of view, conditions in the eurozone haven’t really gotten any better. Now, the ECB is printing more paper money in hopes it will spur the economy. But money printing failed in Japan and had a limited impact in the U.S., except for making those who already had sizeable assets richer. I doubt the outcome will be any different in the eurozone.
One of my predictions for 2015 was that the U.S. dollar would be on par with the euro. If the Federal Reserve raises interest rates and the ECB keeps printing 60 billion euros a month in new fiat currency, the course is set.
For you, that means 2015 could be a great time to take that vacation to Europe. For American companies, that means declining revenue, meager profit growth, and lower stock prices. (Almost half the S&P 500 companies derive revenue from outside the U.S.)
As of the third quarter of 2014, central banks around the world held 1.39 trillion euros in their reserves. (Source: International Monetary Fund web site, last accessed January 26, 2015.) As euro volatility results in central banks scrambling to save their reserves, will they run to buy more U.S. dollars or load up on gold? If you are a long-time reader of this column, you know my bet is yellow, not green.