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Next Sunday the people of Greece will head to the polls for what is essentially a referendum on austerity. There they will decide the fate of the debt laden country and that of the Eurozone. If the conservative New Democracy and PASOK party can manage to garner a majority in Parliament, then the Greeks will have elected to live with the austerity which came with the bailout package so they can remain in the Eurozone. If, however, the more radical anti-austerity parties gain a majority, Greece will likely see itself ejected from the common currency.

The tough austerity measures Greece has undertaken to meet the conditions of its second bailout package have left it mired in one of the worst recessions to date. The unemployment rate sits at a whopping 21.9% and the unemployment rate among youth has been above 50% for some time now. Naturally, the people of Greece are none too happy with the austerity measures.

Nonetheless, there still remains a large, albeit dwindling, number of people who recognize the consequences of failing to meet the bailout conditions. These people, who make up the majority of the New Democracy and PASOK voter base, are willing to endure the austerity to remain in the euro. But we must ask ourselves: How many of these people will remain willing to accept the austerity now that Spain has received a 100 billion euro bailout with no strings attached? What incentive do Greeks have to support the austerity which came with their bailout when the same conditions aren't being applied to Spain?

The situation in Greece was already a precarious one with the New Democracy and PASOK parties more or less tied with the more radical Anti-Bailout parties in public opinion polls. The shift in public opinion, which will undoubtedly come from Spain's bailout, may be enough to tip the scales in favor of Anti-Bailout parties such as Syriza.

I would exercise caution going into the weekend, perhaps even rack up some shorts. In fact, loading up on VIX ETNs like TVIX and VXX and dumping them Monday morning may be a good way to reel in some quick gains if the elections do go sour.

Source: Has The Spanish Bailout Made Things Worse For Greece?