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HiFX: Greece stalemate leading to market tensions

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Greece stalemate leading to market tensions

Ongoing uncertainty regarding Greece's political future is leading to tensions in the financial markets, a foreign exchange specialist has said.

Talks on forming a coalition government have so far come to nothing following the country's recent election, while speculation about Greece pulling out of the euro is continuing.

According to HiFX, this is making investors around the world increasingly jittery, which could impact on online money transfer activity in the coming days.

Chris Towner, director of FX advisory services at the group, commented: "The market seems tense as though bracing themselves for something to happen, but not sure what it will be. Volatility is therefore expected to increase."

He believes it is currently too early to predict whether or not Greece will stay part of the single European currency. This, he said, is because any positive outcome of talks on putting a government together will merely put the country's alarms on amber rather than red.

Mr Towner argued that Greece is in a "downward spiral" at the moment, which means pulling out of the euro may be its "only alternative". He described the country as small enough to manage an exit from the currency in an "orderly fashion" and said this move could potentially strengthen the European Union.

However, he warned that if Greece pulls out of the euro, it may set a "dangerous precedent" for other European countries, many of which are much larger and therefore too big to bail out.

Mr Towner added that Greece is putting party politics above the best interests of the country at the moment. Furthermore, he suggested Greece appears to believe the European Central Bank may be bluffing about not handing over bailout money if a government is not formed.

Coalition talks have stalled so far because the Democratic Left party has ruled out the possibility of forming a coalition with pro-bailout parties unless Syriza is part of the union. However, this party opposes austerity measures, which could put it in conflict with the European Union.

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