The failure to elect a new President in Parliament on Monday, which resulted in the formal declaration of early elections at the end of January, as expected, has caused concern to financial circles, with the Athens stock exchange experiencing 11% losses and the yield of three-year treasury bills exceeding 12%.
The fact that the yield of short-term bill surpasses that of long-term t-bills is a clear indication of how concerned the markets are. Meanwhile the risk premium against possible bankruptcy (CDS) increased from 986 base points before Christmas to 1,219 base points, evoking memories from 2012, when the crisis peaked and Greece’s place in the Eurozone was at risk.
The major concern for potential investors appears to be the threat the political uncertainty generated by the snap elections may have on the development of the international rescue plan, with some fearing that SYRIZA’s leadership may result in a derailment of the program. The inability of other parties, such as PASOK, to provide definite solutions further increases the worries.
The general feeling is that Greece’s creditors and partners will not allow the new government much room for maneuvers, since the impact of the “Greek problem” on the Eurozone has been limited. As such, a government adopting a more aggressive stance may then experience greater pressure.
Although SYRIZA is largely tipped to succeed New Democracy at the helm of the Greek state, it is still not clear how it intends to address the public debt. After all, the euro crisis seems to be more of a political crisis than a financial one. After all, while the Athens stock market saw losses of 11% when the elections were announced, it managed to limit them to 4.5%. Nevertheless, Greeks shares have dropped 45% since March, the worse performance after Russia.
