Greece election won't solve structural problems: EM Cap

Global markets are keenly watch the Greece election outcome on June 17. In an interview to CNBC-TV18, Seth Freeman, managing director at EM Capital Management says, it appears that Greeks want it both ways. "They would like to stay in the euro, keep the euro, at the same time, cut out quite a few of the austerity programmes, especially debt of the austerity programme that has been forced upon," he adds.

The problem, he says, is that it doesn’t solve any of the structural problems. "Greece's economy isn't really big. The size of Greece is small relative to Italy and Spain. I personally believe getting it over with now and removing this uncertainty that is going to come back to us in six months or so really isn’t best for the global economy," he adds. According to him, if there is no clear outcome, there will be sell-off in the markets. Below is the edited transcript of his interview on CNBC-TV18. Also watch the accompanying video. Q: How the markets have positioned themselves ahead of the Greek election? In the three outcomes; a) there is a pro bailout party comes in the New Democratic Party, b) If Syriza comes in, which is looked up on as a big market negative and c) if there is no clear decisive victory. In the event of all these three verdicts coming through, how do you expect the markets to move from there on? A: I think there will be some sort of short-term relief. It appears that Greeks want it both ways. They would like to stay in the euro, keep the euro, at the same time, cut out quite a few of the austerity programmes, especially debt of the austerity programme that has been forced upon. The problem is that it doesn't solve any of the structural problems. Greece's economy isn't really big. The size of Greece is small relative to Italy and Spain. I personally believe getting it over with now and removing this uncertainty that is going to come back to us in six months or so really isn't best for the global economy. Q: How do you expect the global markets to move from next week? Will they continue to rise in hopes that central banks will act? A: It is hard to know until we know the outcome of the elections. What is happening simultaneously is there is anticipation that the US Fed will increase liquidity. We also heard from Britain that they plan to release lot of liquidity. So, I think the markets in the US really reflected the fact that we got some good strong rhetoric from these other governments. Q: A lot of people that we spoke to are saying that the pro-bailout party will win and perhaps that is part of the reason why we saw all those markets move higher in the past two sessions. If we don’t get a clear outcome, do you expect the markets to sell-off? A: Yes, I think there will be more fear based on what economist and different pundits are telling us about such a disaster, if Greece pulls out of the euro. Again I think the sooner the better. At a certain point, Bill Gross mentioned that Germany is becoming increasingly fatigued. You cannot just keep putting liquidity out. It doesn’t solve the underlying issues of demand and low employment.