Just How Much Did Greece's Election Roil Its Recovery?

Syriza has rocked and roiled Greece.

The run-up to the anti-austerity government's election in January and since has resulted in some serious upheavals in Greek assets. Greek shares and bonds whipped higher and then lower as investors alternatively expected Syriza to wring concessions from its creditors or worried its intransigence would force the country out of the single currency region.

So far it's unclear what the impact of this uncertainty has been on Greece's underlying economy.

Greece had seemed to be on the road to recovery until the latest political uncertainty hit. Now investors aren’t so confident.

Economic data releases usually lag events by months if not quarters. Having said that, it could be that some disappointing Greek GDP numbers for the last three months of 2014 were influenced by political upheavals.

More evident is Syriza's impact on sentiment--and not just among bond and equity investors. There were hefty deposit outflows from Greece's banks during December and January amid worries they'd be cut off from emergency central bank funding if Syriza couldn't strike a deal to extend its bailout program, which expires at the end of February. Meanwhile, a large number of Greeks stopped paying their taxes in December and January, perhaps hoping to benefit from a tax amnesty.

The volatility largely follows the Greek political timeline of the past couple of months.

On Dec. 9, then Prime Minister Antonis Samaras brought forward elections for the country's largely ceremonial presidency. However, popular sentiment had increasingly shifted against his center-right administration's austerity program. So when the parliamentary vote was taken for the presidency, it in effect became a vote of confidence in his government's program.

Failure to elect a president on Dec. 17 triggered a second round on Dec. 23. Failure then produced a third round on Dec. 29. When no president was elected even after that, a general election needed to be called and was held on Jan. 25. More recently, Feb. 28 signaled the end of the bailout program before Greece struck a deal with its creditors, but only to extend Greece's funding lifeline for four months. Meanwhile, a whole new deal will have to be struck over the shape of Greece's next bailout program. While the eurozone's recovery looks to be showing green shoots, again, Already, mutterings about Grexit are resurfacing.