Investors in Greece’s future spooked by political uncertainty
Greece is in the midst of a snap election meant to resolve political indecision over economics
Yields on Athens’ 10-year bonds rose to nearly 9% – two percentage points above the level that is considered sustainable – reviving memories of the euro crisis in the country where it began. Mounting concerns over Greece’s ability to weather a presidential election, brought forward in a surprise move by the prime minister, Antonis Samaras, continued to unnerve investors ahead of the first round of the vote in the Greek parliament next week.
Under Greek law failure to elect a new head of state by the ballot’s third round on 29 December could trigger a general election. The stridently anti-bailout main opposition party, Syriza, is tipped to win that poll. The radical leftists have made a debt writedown and the end of austerity their overriding priorities if voted into office.
Although Samaras called the election in a bid to expunge the political uncertainty engulfing Greece, the slim majority held by his government, compounded by the leader’s repeated warnings of Greece leaving the eurozone if Syriza assumes power, has accelerated investor nervousness.
The sell-off on Thursday intensified after the prime minister called on MPs to assume “political responsibility” by backing Stavros Dimas, the ruling coalition’s candidate for president. With a narrow majority of 155 seats, Samaras must muster a further 25 votes if his nominee is to garner the requisite 180.
“Syriza has once again brought the word Grexit [Greek exit] to the mouths of foreigners,” he told deputies in his conservative New Democracy party. “What Syriza says provokes fear and doubt everywhere … the markets are reacting because the possibility of elections occurring, and Syriza winning, is interpreted as assured catastrophe for the country.”
Greece, which returned to the international debt market in April after a four-year hiatus, could throw away its economic recovery, Samaras said.
“If a president is not elected on 29 December and we go to elections in January everything will be up in the air. Fear will rule over the country. And if populism prevails then Greece will not be able to stand on its feet after February,” he added.
This week Athens was granted a two-month extension of its bailout programme by the EU, European Central Bank (ECB) and International Monetary Fund, its “troika” of creditors, after negotiations aimed at taking Greece into a “post-bailout” era stalled. Four years after receiving some €240bn (£189bn) in emergency funds – the biggest rescue programme in global financial history – the nation had just begun to show tentative signs of economic recovery, recording its first growth since 2008.
Failure to meet the 28 February troika deadline has raised the spectre of Greek banks running out of liquidity if life support money from the ECB is put on hold as a result of a stand-off between a Syriza-led government and western lenders.
Amid tensions that are bound to worsen ahead of the presidential poll, the leftists accused the conservative-dominated coalition of fearmongering in a desperate move to persuade MPs to vote for the 73-year-old Dimas.
“The prime minister doesn’t hesitate to beseech the markets to attack the country,” Syriza said. “[Samaras] is very mistaken if [he] believes that by rehashing that old dish of exiting the eurozone, he will terrorise society, which is suffocating under the anti-social policies of the memorandum [bailout accord].”