"An Added Uncertainty: Greece, Spain, and Portugal
Another confrontation looms between the Greek government and the rest of the euro area next year. Because the government in Athens seems increasingly unlikely to muster enough votes to elect a new president to succeed Karolos Papoulias, early elections are possible.4 Syriza—the main leftist opposition party seeking to end large parts of the country’s current reform program, lower Greece’s primary surpluses, stop privatization programs, and reverse some structural reforms—is leading in the polls. Should it win power in new elections, the euro area will likely refuse most of its political demands, setting the stage for a mini-repeat of the summer of 2012, where the euro area relied on market mayhem to convince Greek voters to vote for a responsible government. Whether or not such a hardball electoral tactic works again, it will complicate decision making for the ECB on sovereign bond purchases. The ECB would hardly want to purchase any Greek government bonds in a period of conflict over Greece. The ECB lacks the option of buying a GDP-weighted basket of all euro area members, and it would not want to determine which countries’ bonds would be eligible, politicizing its own role in a most unwelcome way."