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LONDON (Reuters) - 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 euro zone, 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 exits by other countries, by mapping previously uncharted waters.
There is no legal provision or framework in EU Treaties for a country to leave the euro; a decision to join the single currency was deliberately designed as an irreversible move.
That's not to say unilateral exit is impossible, but the absence of any agreed mechanism at the very least upped the ante in previous crisis years, magnifying the fear of the unknown and suggesting the breakdown of intra-euro relations would have to be extreme to justify defying the entire EU Council.
However, there has always been an alternative legal route to leaving the euro: leaving the EU altogether.
Considered unthinkable by most EU countries, Article 50 of the EU's Lisbon Treaty states a member can decide to withdraw from the bloc according to its own constitutional requirements.
The article sets out notification protocols and says all treaties, presumably including commitments to the single currency, "shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after notification..."
If Prime Minister David Cameron's Conservatives win the May elections and table an EU referendum by 2017 as promised, then Britain could well be the first EU country to invoke Article 50.
Even though Goldman Sachs economists said on Tuesday that Brexit was costly and unlikely, they reckoned a Conservative election win was on the cards, despite the opposition Labour Party's lead in the polls and hosts of coalition possibilities.
Yet, opinion polls show that up to 50 percent of Britons would vote to leave the EU, meaning any Conservative election win will bring with it significant EU exit risks.
The link with Greece is that simply by leaving a path for disgruntled EU and euro zone members to take in the future, Brexit could codify what once seemed like a fanciful, unilateral action into a coherent, plausible process.
Even at the margins, it could also give countries faced with future bailout negotiations a heftier bargaining chip in what often amounts to the poker game of debt and reform talks. Push us too hard, in other words, and there is always a door to walk through.
For most countries, this still seems too drastic a route to escape the strictures of the single currency alone, throwing the baby out with the bathwater for those who prize close political ties with western Europe as well as free trade in goods and movement of capital and people.
Regardless of Syriza's stance on austerity and debt renegotiation, the party still supports euro membership. What's more, the latest public opinion polls show Greek support for the euro, let alone the EU, at more than 70 percent.
For all the media reports this week of Berlin making contingency plans for a Greek euro exit, Germany and the rest of its euro partners stress they too want Athens to remain in the currency even if more tough negotiations are necessary.
Despite the recent market volatility, investors still don't see Grexit as the most likely outcome. Economists at Germany's Commerzbank this week raised the chances of a Greek withdrawal from the euro, for example, but still put the chances at just 25 percent.
Greek 10-year government bond yields at around 9.6 percent are still a fraction of where they were at the height of the crisis, and don't come close to discounting the sort of turmoil associated with an exit, new currency and massive default.
"Nine percent yields won't protect you from anything like that fallout - this is just an expression of risk," said former UBS chief economist George Magnus.
Yet heightened risk rather than strong convictions is just what markets everywhere, including the currency and options markets, are again trying to calibrate.
"We're not arguing that EMU exit version 2.0 deserves anything close to these 2012's risk premia... We just think that current risk premia in FX are too small for the range of possible outcomes," said JPMorgan strategist John Normand.
editing by David Stamp