It is hard to imagine the main creditor countries in Europe accepting such a political approach. Also, the countries that have benefited from bailout loans and met strict conditions, would find it hard to justify such a difference in treatment to their electors. Last but not least, the administrative elections in France and in Andalusia, Spain, have indicated that inflexibility towards Greece is “paying off” in electoral terms. In France, the outcome of the first round has reduced the chances of a victory at the Presidential elections of 2017: Marine Le Pen’s Front National stopped at 25.1% of the vote, against 27.9% for Sarkozy’s UMP. According to voting intention surveys reported by Bloomberg, the second round should afford the UMP control over around 80 departments out of 101. In Spain, the party led by current Prime Minister M. Rajoy incurred a severe defeat, with a plunge in consensus in Andalusia, from 40.7% at the 2012 elections to 26.8%. The ascent of the newly-formed parties, Podemos (14.8%) and Ciudadanos (9.3%), fell short of some expectations in this case as well, while the PSOE contained losses, achieving 35.4% of polls vs. 39.6% at the previous elections, but recovering from 23% at the European elections of 2014.

On the whole, although the outcome of the recent elections in Spain and France rewarded the “traditional” parties, the danger of Syriza’s success aiding the implementation of debt restructuring policies and a return to national currencies will induce euro area governments to take a harsher stance against Greece.

While Greece’s exit from the euro area seems to be a real possibility, the phases and timeline of the process remain to be defined. Last week the Greek Ministry of Finances published preliminary data on cash imbalances in the opening two months of the year, essentially bringing good and not-so good news. The good news is that the primary deficit has converged towards the objective, whereas the poorer news is that this was achieved through lower spending (excluding wages and pensions). Primary surplus in the first two months of 2015 amounted to around 1.2 billion euros, up from a disappointing 0.443 billion in January. The surplus was obtained by heavily curbing expenditure (excluding interest), on the rise to only 6.3 billion (-0.1 billion vs. February 2014), whereas revenues amounted to 7.8 billion (-1.7 billion vs. February 2014). The Greek government, after overcoming the difficult month of March, should face two months of relatively smooth cruising: April and May are not expected to bring especially burdensome financing needs, so that the next tests could come in June and especially in July, when the payment of the bonds held by the ECB will be due.

Primary surplus (EUR Bn), Source: Hellenic Republic Ministry of Economy and Finance

Public Revenues and expenditure (cumulated, EUR Bn)
Source: Hellenic Republic Ministry of Economy and Finance

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