Will Greece’s Election Settle Anything?

Three main risks will overhang European markets next week, Greek election results into the Monday market open, testimony by ECB President Mario Draghi on Wednesday, and European purchasing manager indices as a guide to broad economic growth that same day.

Greece faces a too-close-to-call election on Sunday and the results could well result in a hung parliament despite assurances to the contrary. The election was called when Prime Minister Alexis Tsipras resigned his post on August 11th in an effort to weed out rebels within his Syriza party (itself rather rebellious) who were destabilizing government efforts to implement the bail-out agreement reached with Europe. 

Since Tspiras has so vocally ruled out a coalition with his main opponent, New Democracy, it is unclear which party will be able to form a coalition with weaker partners. 

"The results could well surprise and hand a clearer victory to one or the other of the two main parties, but the more likely outcome is a minority coalition government and one that may take time to assemble", says Scotia Bank. 

Syriza's current polling is about six points lower than it was in the January 15th election while New Democracy's is about three points higher and PASOK is also polling a little higher.