Last time the Greeks had an election, in 2012, the markets feared calamity and the word eurogeddon was shortlisted for the Oxford University Press 'word of the year' prize. But that fear was misplaced: Greece was never going to leave the euro, regardless of what happened to its debt.
This time round, with elections due on Sunday, the popularity of the anti-austerity party, Syriza, is greater but the market atmosphere is calmer, helped by the ECB's long awaited announcement on Thursday that it would commence a programme of quantitative easing designed to boost demand.
Yet the fundamentals of the situation are unchanged. Now, as then, nobody can force Greece out of the euro except Greece itself. There is nothing in the European treaties that sets out a route for those who want out. They cannot be kicked out because to do so would require a treaty change, which requires unanimity so Greece themselves would have to agree to it. Yet polls show that a massive three-quarters of the Greek population support euro membership. For as long as that is the case, Greece will be in the euro, and investors that bet on anything else will lose their money.
There is another crucial factor that has not changed, and that is that the 'Troika' of international institutions that lend to Greece - the IMF, the European Commission and the ECB - do not want to do anything that increases economic instability and, in particular, raises the prospects of psychological contagion into other markets, caused by, let's say, pictures of a run on a Greek bank being beamed round the world, just to pick an example at random.
With euro area economic confidence febrile at best, the ECB is keen to send a clear message of 'steady support back to normal'. Anything that undermines that, in presentation or in reality, will be avoided at all costs. Greece's economy is so titchy compared to the rest of Europe as to be hardly relevant to the aggregate data, but its ability to mess things up in the media is huge.
This lends itself to excellent opportunities for a potential incoming anti-austerity government to free-ride. Basic game theory suggests they can merrily announced an intention to default on their debt repayments and spend the savings from not paying debt interest on job creation programmes confident in the knowledge that when liquidity in the banking system starts to dry up, banks will be able to either apply to the ECB under existing facilities, or a new line of Troika credit will be negotiated that saves everyone's face while saving their government money.
The Finnish prime minister gave a clue as to what the end game looks like by stating at Davos that they would respect the mandate of a democratically elected Greek government and were prepared to renegotiate everything up to the point of actually writing off the debt principal, a view reportedly endorsed by his Irish counterpart . So that would include debt holidays and extension of repayment terms, leaving more space in the country's budgets for a bit of populist spending.
Remember also, there is a crucial difference between defaulting on debt and leaving a currency. If you lend me ten pounds and I don't pay you back, you might think twice about lending to me again, but would I have to leave sterling?Suggest a correction