Greek Elections Tell More of Euro Country Bankruptcy Than European Instability

World participants await Greek election results, all with a view to either economic insight or political revelation. Frankly, most economic participants have, or should have, guarded against Greek withdrawal from the euro. Most interesting is the juncture of political policy and asset values coming out of the election.

Should Greece recede from the euro, how much more could asset values really decline. One might be justified in expecting market participants pricing such a result into the current market. Perhaps what is also accounted into the market is the European Financial Stability Facility (or EFM) and IMF will cut unspent capital to Greece, creating cash for others. Or, at least a reduction in bailout money to Greece.

From a realistic perspective, Greek withdrawal could indicate a full default on their bonds. Which brings an ultimate escalation of previous principle reductions on Greek bonds created by the notorious Collective Action Clause. Full default means no more payment. Implicating losses for deeply invested sovereign entities such as ECB, EFSF and the EU.

Greek withdrawal from the euro tells of a sovereign country controlling its own currency. Meaning a sovereign does with its own currency what it wants. Greek bonds issued as a euro country will have no more value than what a new Greek country, under its sovereign currency, will give them.

Such a course will grant Greece its own bankruptcy. Reality is absorbed by knowing that in the EU, no structure exists for a country declaring bankruptcy. Rather, the country reverts to its own sovereign currency status, despite previous euro leverage, and will accept or decline what debts and accounts the sovereign sees fit.

Therein resides the current economic isolation of Greece. No entity wants to counter-party on those terms, save for the existing and dedicated support structures of the EFSF, EU, ECB and IMF.

Some of the supporting funds named above were exempt from previous CAC cuts on Greek bonds.....Should Greece chose to decline further euro currency participation and monetize their debt, even the protected funds could experience total loss associated with a full Greek default.

Unlikely is such a proposition in that Greece, even if on their own currency, will want to maintain EU membership. Sustained EU membership carries considerable value, especially when not a euro currency participant, simply look at Hungarian issues.

Withdrawal from euro currency participation, while maintaining a friendship with EU resources, seems more likely than Greece going it alone. Median propositions are more probable than extremes. Still median propositions require negotiations between Greece and EU on how a new drachma translates into pre-existing euro debts, and new euro versus drachma payments.

Also potentially extreme is the concept of Greece ultimately staying in the euro....Where Greece might consider such an approach, EU is unlikely to see this as realistic. Too much of a chasm exists between Greece's economic declines versus economic stability among leading euro zone countries.

Clashing with economic reality is Greece’s desire to assert itself as a nation, a country with an originating place in Western Civilization. Socially and politically, Greece's decision should be based upon the reason and logic still known as a foundation to civilization.

Overall, election results will not necessarily portend of a Greek exit. Rather time will tell. When time knocks on the door, it makes good reason and logic that Greece will decline further euro participation but will sustain EU membership, with all  implications and sustained benefits.