Naked Capitalism has an interesting post on the probability of a Greek exit from the eurozone (Grexit). After Europe agreed to bail out Greece again at the end of November people have relaxed considerably about the prospect of Greece being forced out. On Intrade betting markets, the risk of an exit by Dec13 has decreased down to 30% from over 60% previously. Anecdotally, Intrade seems to over predict rare events such as Israeli air strikes and Euro exits so a real probability 20% makes sense (The way Yves Smith got to the 20% number, by suggesting that Spain and not Greece could leave the EU is harder to believe). Currently, the main risk of a euro exit is that anti-EU parties such as SYRIZA and Golden Dawn outnumber New Democracy and PASOK in the polls.
If there was an election today, Greece would be put on a path to leave the union.
An early election could be triggered by a number of events. Failure of the current government to approve future conditions from the Troika during quarterly reviews in 2013 is one route. A gradual bleeding of MPs from ND, Pasok and Democratic Left, which would cause the current coalition to lose its majority, is another route.
It will be interesting to see how ND balances the line between alienating their supporters and kowtowing to the Troika. No one wants to see Greece leave the EU at this point. New Democracy will have to do everything they can to fulfill their side of the bargain. And on the other side of the coin, as long as New Democracy is acting in good faith the Troika will have to give Greece what they need despite their expected continuing poor performance. A country with a broken banking system, capital flight of both the financial and human variety and general political unrest is not going to be able to grow out of their problems anytime soon.
The news flow might have died down, but the politics in Greece will be quite interesting in 2013.