GREECE-VOTE/FRANCE-REACTION Investors worried by upcoming election in Greece, analyst says

Record ID: 328415

  • Title: GREECE-VOTE/FRANCE-REACTION Investors worried by upcoming election in Greece, analyst says
  • Date: 29th December 2014
  • Summary: SCREEN WITH GRAPH SHOWING GREEK INDEX ANALYST AT DESK SCREEN SHOWING GREECE INDEX
  • Embargoed: 13th January 2015 12:00
  • Keywords:
  • Location: France
  • Country: France
  • Topics: General
  • Reuters ID: LVA4ZSJTAGUGCQO1NIGXOKDN3FY9
  • Story Text: European shares slid on Monday (December 29), after lawmakers rejected the government's candidate for president, leaving Greece facing a snap election that could derail its bailout programme.
    Sole candidate Stavros Dimas, a former European Commissioner, fell short of the 180 vote super-majority needed to become president. He secured 168 votes in parliament, the same score he achieved in the second round.
    Under Greek law, a general election must now be called, which polls suggest may be won by the left-wing Syriza party that has expressed opposition to Greece's bailout programme.
    Francois Chaulet, an asset manager with Montsegur Finance in Paris, said investors took fright at the prospect of the leftist Syriza party -- which has vowed to write off much of Greece's debt, renegotiate its EU/IMF bailout and roll back austerity -- coming to power in an election slated for January 25 especially as Greek bond yields shot higher on Monday after parliament rejected the government's candidate for president.
    "Within two months, the interest rate required for Greek bonds has almost doubled since we are now at 9.6 percent for the ten-years bonds. This means that the investors who lack confidence mistrust the ability of the government which will be put in place by the elections to honour the commitments that Greece had to take towards its international creditors and that's what poses a problem to the markets, apart from the fact that given the size of Greece, we know that it's a limited phenomenon," Chaulet said.
    He added the new Greek political crisis has served as a reminder for investors that political risk is the main factor driving sovereign default risk in the euro zone.
    "What is happening in Greece is likely to worry investors and likely to worry about the durability of this single currency union in which countries of various economic strength live together. This is not likely to question the return to low growth which is awaited by the markets and the economists for 2015 for the end of this year, but it's a turbulence and anxiety zone for the financial markets on the short term," Chaulet added.
    A negotiating team from the "troika" of creditors from the European Commission, IMF and European Central Bank, had been due to resume talks in Athens next month to wind up the 240 billion euro ($290 billion) bailout and agree an interim, post-bailout programme.
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