UK, Greek election anxiety may see Brexit feed Grexit

By Mike Dolan

British elections in May could arguably have as much impact on euro zone stability as this month's snap poll in Greece, making for an anxious period of up to six months for European investors.

Two new themes for 2015 are already in play on financial markets: an echo of the 2011/12 euro crisis via Greek political upheaval and fears that the country might leave the currency union; and UK political risk and what the election there might say about the chances for a referendum on Britain's European Union membership.

"Grexit" and "Brexit" - shorthand for any Greek exit from the euro and British exit from the EU - may seem unconnected, aside from common roots in voters' disillusionment with European institutions. Their causes are different and the probability of a British departure is much higher, if years away.

Popular opposition parties in Greece blame years of deep recession on austerity demanded by euro zone sovereign creditors in return for billions of euros of loans to rescue the country from insolvency.

Speculation is growing that the anti-bailout Syriza party will win the election on Jan. 25 and try to renegotiate those loans and conditions, provoking another standoff between Athens and the rest of the euro group. This would reignite investors' fears that the tension will eventually lead to Grexit and all it entails for the euro's survival.

While Britain is outside the eurozone, popular unease with waves of immigration from new EU member states over the past decade has forced the ruling Conservatives to promise an "in/out" referendum on EU membership if they are returned to power.

What connects the two is that Brexit could inadvertently help to pave the way for Grexit, or indeed euro...