Markets tend not to repeat the same panic twice, and “Grexit” has been done to death over the past few years. The markets think they have now wised up to politicians, particularly European ones, as a deal always gets done in the end, doesn’t it? Even the ECB got there in the end with QE. So there has been relatively little concern over Syriza’s negotiations with the Troika.
Two points on this:
1. “Syriza must fail and be seen to fail” – an excellent article on this here. This isn’t just about Greece, it is about the message it sends to the rest of the Eurozone, and even the rest of the world. The way that Syriza are treated sets a precedent for how everyone else must be treated. It creates an incentive and the incentive must be that you have to play by the rules if you want to succeed.
2. Tspiras is playing a high-stakes game with his own government, which he ramped up by going into coalition with the other big anti-bailout (yet ideologically right-wing) ANEL. He felt the electorate had dealt him a strong hand, so he chose ANEL in order to go all-in at the negotiations. The trouble is, this binds him on any backflips. Any U-turns, and he not only has to sell them back to his party, but also his coalition partner. Choosing an uncomfortable bedfellow makes this harder. Even worse, the scale of the election victory strengthens the resolve of those bedfellows – and of the more extremist element of his own party. So even if a deal is done, will the Greek government survive it?
So the market isn’t particularly worried, which means it’s not massively hedged for some kind of blow-up. They may be right over the immediate negotiation. But what if the risks of a wobble increase precisely because a deal is done? Could Greece be plunged back into elections or at least a negotiation over a new government if this one should fall?