The prospect of Greek party Syriza failing to deliver on its anti-austerity pledge could undermine the surge of so-called extremist parties across Europe.
That is according to Franklin Templeton’s head of European fixed income, David Zahn.
In an investor update, the Citywire A-rated manager assessed the potential fallout from a failure of the Greek administrations and creditors to come to an agreement over debt repayments on April 24.
Zahn, who is a named manager across several European bond funds at the US asset manager, said the prospect of Syriza leading a much-hyped ‘Grexit’ would only have knock-on effects for Greece itself.
‘Greece’s departure from the currency bloc would probably be more of an emotional than an economic tragedy for the region, in my opinion. Greece is very much a Greek problem, in my view, and its exit from the eurozone would likely be very detrimental to Greece’s economy,’ he said.
While Zahn expects some comprise to be made, albeit with short-term volatility, he reckons the political implications for other countries in the region could be substantial.
‘Syriza is the first extremist party Europe has seen in many years that says it wants to completely reverse what its country’s previous government had done,’ the London-based manager said.
’While Syriza leans far left, its victory seemed, in the short term, to have boosted extremist parties on both ends of the political spectrum in countries such as France and Spain.’
Zahn said this legacy has become precarious with questions raised over the ability of Syriza to actually achieve its stated goal. ‘Syriza has not been able to deliver as much as it had promised, such as adding thousands of jobs to the economy and writing off most of the country’s debt.’
‘Instead, Syriza has had to backtrack and move towards what the previous Greek government was doing. In turn, we see that support for some fringe parties has declined throughout the region recently.’
He highlighted the case of Marine Le Pen, the leader of the right-wing National Front party in France, which gained 26% of the vote in local elections in March but did not, as many had predicted, take the lead in polling.
Similarly, Spanish group Podemos, an anti-austerity group, has also seen a fall-off in voting figures after an initial surge in popularity.
‘If the Syriza party can do what it has promised to do, I think extremist parties will probably become much more popular across Europe,’ he said.
‘However, if Syriza representatives end up reneging on their promises and do not get nearly as much done, I think it will probably mean that we could see a continued drop in the polls for some extremist parties throughout the eurozone.’