Greece Calls Confidence Vote to Dispel Election Concerns
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Greek bonds and Athens stocks rose today after the government said that it will hold the vote next week when parliament resumes after the summer recess. The move was preemptive because the government expected the opposition to file a no-confidence motion, according to a senior government official who asked not to be named discussing strategy.
More than four years and as many prime ministers after Greece first requested outside help at the start of the euro-area debt crisis, the government is still prone to instability as it pushes through the budget cuts and economic reforms demanded by the so-called troika of international donors. The opposition Syriza party won European elections in May, and Samaras labors under a slim parliamentary majority.
“The government aims to refocus the political agenda back to reforms, talks with the troika and bailout exit and away from recent talk of early elections as early as November,” said Thanassis Drogossis, head of equities at Athens-based Pantelakis Securities.
The Athens Stock Exchange Index rose 2.2 percent at 1,081.98 as of 3:14 p.m. local time. Greek 10-year bond yields fell 9 basis points to 6.4 percent, after earlier climbing to as much as 6.6 percent. Greek bonds may enjoy a short-term bounce if the government wins the confidence vote next week, Daniel Lenz, strategist at DZ Bank, said in note to clients.
Presidential Trigger
The vote was announced unexpectedly by government spokeswoman Sofia Voultepsi after a meeting between Samaras and Evangelos Venizelos, president of Pasok, the government’s coalition partner. Samaras, who heads the New Democracy party, and Venizelos are due to meet again today.The confidence motion is designed to demonstrate that the coalition has no plans to call a snap election before Greek President Karolos Papoulias’s term expires in March, the official said.
The election of a mainly ceremonial president to replace Papoulias is a possible trigger for early parliamentary elections because the government will need a majority of 180 votes in the country’s 300-seat chamber to elect the next head of state. The coalition has 154 lawmakers in its ranks.
As well as ending speculation over early elections, the move can give the government “a fresh green light to proceed with its crucial last round of negotiations with the troika,” said Vangelis Karanikas, head of research at Athens-based Euroxx Securities. It aims “to secure political stability in the country and give the government the time to proceed with important structural reforms,” he said.
Syriza Challenge
Representatives of the troika of the International Monetary Fund, the European Commission and the European Central Bank are currently in Greece for talks on the bailout program.Even after Samaras rejected demands by Syriza leader Alexis Tsipras to call early elections, Greece’s sovereign securities tumbled on investor concern that the government won’t be able to cover its financing needs when the aid program expires in December.
Opinion polls show that Syriza may win the next election. The party advocates a “significant” writedown on Greek government bonds and says it will reverse economic reforms backed by the troika.
Buying Time
If the government secures the election of a new president, a national ballot won’t be held before May 2016, giving Samaras time to capitalize on a projected economic rebound. The IMF and the EU say Greece’s economy will emerge this year from the longest recession on record.Samaras said last week that Greece won’t ask for new emergency loans from the euro area when the current program expires, and that it may forsake IMF disbursements scheduled for next year and 2016.
The loans, which have kept Greece afloat since 2010, were attached to strict conditions of belt tightening that triggered a social backlash and exacerbated a recession that left more than a quarter of the workforce without a job.
Greece’s lenders say structural economic changes are necessary, as even after the biggest sovereign writedown in history, the country’s public debt will peak at 177 percent of gross domestic product this year, more than any other nation in the euro area, according to European Commission projections.
“Polls show that support for the government is weakening,” John Loulis, an Athens-based political analyst and communications strategist, said by phone yesterday. “The move to ask for a confidence vote is an attempt to cluster support from its lawmakers and show that it still commands power.”
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