Greece Lurches Back Into Crisis Mode

Greek stocks fell more than at any point during Europe’s debt crisis today after Prime Minister Antonis Samaras gambled his political future on bringing forward a parliamentary vote on a new head of state.

Greek stocks tumbled the most since 1987 and three-year yields surged in response to the prime minister’s move. Unless he can persuade 25 opposition lawmakers to support his choice, Samaras will be forced to call a parliamentary election that anti-austerity party Syriza would be favorite to win.

“Investors have taken a second look at Syriza and understood that at this point in time it’s more radical than the traditional left in Greece,” said Nicholas Veron, a fellow at the Bruegel research institute in Brussels. “If Syriza takes over it won’t be a smooth ride.”

Less than a month before Samaras had hoped to lead Greece out of the bailout program that has ravaged the country for the past four years, the resistance to his policies is fueling doubts about whether he can stay the course. While Syriza has pledged to stick with the euro, its plans to roll-back Samaras’s budget cuts evoke memories of the financial chaos that threatened to bust apart the currency union in 2012.

Greece’s benchmark stock index dropped 13 percent and the bond market signaled investors are concerned about short-term disruptions, as the yield on 3-year debt jumped 176 basis points to 8.23 percent, surpassing 10-year rates.

“It’s possibly a good decision, but in the end it’s in the hands of the decision makers in parliament and the population,” German Finance Minister Wolfgang Schaeuble told reporters in Brussels. Greece’s reform program is “not yet over the hill,” he added.

(Πηγή: bloomberg.com)