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Greece vote might not rock markets as much as you think

Debt Wracked Greece Prepares For Critical General Election

Debt Wracked Greece Prepares For Critical General Election

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Updated: July 18, 2012 6:34AM

There is no need to rush out to buy gold or stuff the family savings in a mattress when Greek voters go to the polls Sunday, expert said.

Voters will be deciding whether to keep living under tough budget-tightening policies — or to chuck the bailout measures and exit the euro market. If New Demo­cracy leader Antonis Samaras wins, and his conservative party takes control of parliament, Greece will stick with the euro and its austerity policies. If the Syriza party wins and the left takes control, it could mean that Greece ends up going its own way.

The results will clear up whether “the people and the leaders of Greece [are] willing to sacrifice what they need to shore up their financial issues,” said Joe Greco, managing director of Meridian Equity Partners. Or not. But the vote won’t necessarily overly jolt the stock market, experts said.

If Greek voters continue the austerity program, the U.S. stock market and other stock markets worldwide should benefit. If Greece stops using the euro, that “would probably rock the markets a little” on Monday — but it shouldn’t catch banks and market regulators unprepared, Greco said.

Still, the worst scenario, experts said, would be the inability of any of the parties to form a coalition to govern the country. That would mark the second time in six weeks that the 10 million Greeks were unable to choose a new government, as a May 6 vote also failed to lead to a coalition.

The vote will signal important outcomes for the American economy, too, because if stock markets deteriorate, the Federal Reserve Bank may vote Wednesday to renew stimulus programs that offered cheap loans to banks and injected liquidity into the financial system to help boost the economy, Greco said.

If the Fed announces a new stimulus program, the markets will jump higher, he said, but Fed inaction will send markets down.

Even more important are the bigger implications of the Greek vote: A deepening European recession, driven by other countries such as Spain and Italy facing their own financial crises, slows the world economy at a time when the United States is experiencing stalled employment, industrial output and retail sales growth.

Said Blu Putnam, managing director and chief economist of the CME Group: “We are in less control of our destiny than we’d like to think since the stability of the European financial system influences how fast our companies can grow. It makes us more aware we’re in a more fragile world than we realized.”

Indeed, Chicago analysts say some local industries will have plenty to grapple with if Europe suffers a financial meltdown.

McDonald’s “revenues are starting to slow and same-store sales have started to drop,” said Erik Kobayashi-Solomon, a market strategist and editor of Morningstar OptionInvestor.

A Morningstar analyst contends the Oak Brook-based fast food company has already slowed down the pace of new franchises in Europe.

A McDonald’s spokesman said that while the company will not report information on new restaurant openings in Europe until July, by March 31 it had seen a net opening of 28 restaurants there and projects to open about 200 in 2012.

An EU financial slump could also mean fewer European travelers get a glimpse of Chicago’s skyline, said Richard Longworth, a senior fellow at the Chicago Council on Global Affairs.

And fewer of those who come will buy tickets to museums, slices of pizza or pay money to see Adam Dunn hit a home run at U.S. Cellular Field.

“When times are tough and unemployment is high, wages are tight, and people travel less,” Longworth said. “Chicago has increased its tourism promotion expending in Europe, and the economic crisis in Europe isn’t going to help that.”

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