Business Cycles, Growth, Economic Structure Economic Policy Europe

Statement on the Resignation of Alexis Tsipras

The resignation of Prime Minister Tsipras is good economic news for Greece and for Europe. The odds are good that new elections will bring a more competent and pro-European government into power. This will improve the prospects for a successful third program and thereby for more economic growth.

In the short-term, the political vacuum created by the resignation is risky for the Greek economy and financial markets. The political vacuum creates uncertainty which is poison for companies and investors and will make the Greek economy temporarily more instable. Quick elections and the formation of a new government will be crucial to avoid more damage to the Greek economy.

The Greek economy would fall again into a deep depression in the unlikely event of a pro-Grexit government being elected. This would almost certainly make the third program fail, and losses for Europe and its taxpayers would be significant.

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