George Liu's  Instablog

As the hubbub over a potential Greek exit from the Eurozone starts to die down due to New Democracy's victory, the attention now has become focused on Germany, arguably the healthiest and most important member of the Eurozone right now.

Now, there are calls for Germany to leave the Eurozone due to, among other things, its opposition to the "mutualization and monetization" of the eurozone debt, as stated by Anatole Kaletsky, an analyst at the GaveKal consultancy. He goes on to note that a German exit would be "very bullish for practically all global risk assets."

Although a German exit from the Eurozone could have some benefits, it seems Germany is intent on staying, even signaling it could compromise. Although Germany remains steadfastly opposed to eurobonds, German Chancellor Angela Merkel has stated that she may be open to a redemption pact. Moreover, international markets today were significantly boosted by reports that Merkel would allow the use of the eurozone bailout fund to purchase the bonds of troubled EU states. Of course, as FT Alphaville points out, this isn't something extremely significant as the charters of both the European Stability Mechanism (ESM) and European Financial Stability Fund (EFSF) already allow the purchasing of sovereign debt of EU states. Regardless, the German government seems more willing to be flexible on the policies of mutualization and monetization of the eurozone debt; if so, this would provide no impetus for Germany leaving the Eurozone, regardless of what the subsequent consequences are.

According to Reuters, a senior eurozone official has said that the terms for the second bailout of Greece will be renegotiated "because circumstances have changed."

If this is true, it should be comforting to Greece as it could break the self-perpetuating cycle of misery austerity has created for the country. However, I would like to point out a bit of irony: SYRIZA, the party that lost and everyone was afraid would formulate policies that would lead to a Greek withdrawal from the Eurozone, focused its campaign on calling for a renegotiation of the bailout terms. Although their renegotiations would have probably been more extreme than that of New Democracy, which currently leads the conservative Greek coalition, EU officials have staunchly affirmed in the past that they will not tolerate a renegotiation.

It seems as if the Eurozone leaders have finally swallowed some of their pride and started to accept a wider array of alternatives to save Greece. Lets hope they deliver.

In other news, after New Democracy's victory, deposits have started to trickle back into Greek banks. With SYRIZA defeated, more and more Greeks are now confident that Greece won't leave the Eurozone.

According to official projections of the Greek election, New Democracy is projected at 30.1%, Syriza at 26.5%, Pasok at 12.6%. This would allow New Democracy and Pasok, which has signaled it will ally with New Democracy, to comprise a majority of the government. Tsipras has already conceded defeat.