Now that Syriza have had the chance to get their feet under the desk, it is inevitable that Greece, and possibly the whole Eurozone, will face an unmitigated economic disaster. Here’s why:
- Tax collection is down 40% in January, in a country where the head of the tax department faces death threats for chasing unpaid taxes
- The new government are demanding to renegotiate debt terms, Germany is having none of it
- The new government has immediately built a reputation for being anti-business by halting the Eldorado mining project, shunning foreign capital
- The new government has re-hired sacked government workers and increased the minimum wage
- Bank deposits have reached 2012 lows as depositors pulled out over 7 Billion euros in January
- Spain’s anti-austerity party Podemos looks set to win the next election, to be held by the end of 2015
What this points to is businesses quitting the country (particularly shipping), less disciplined Government spending, and weaker tax collection. This will lead to an unbalanced budget, and without bailouts from the EU, the country will go bankrupt. The Eurozone can’t set a precedent for debt renegotiation otherwise Spain will follow. Their only option will be to try and ally with Russia. Who knows what will happen after that.
I think it will be a while before the fundamentals reach Australia, but the Eurozone accounts for 23% of global economic activity. The first thing I suspect will happen is a stock market collapse in the Eurozone with other markets to soon follow as investors are spooked. So I’m staying in cash.