Financial Times: Greek shares drop on vote outcome

29/12/2014

By Elaine Moore

Greek shares and bond prices fell on Monday after an unsuccessful presidential vote left the country facing a snap general election and political unrest.

Athens stock exchange fell to a two-year low and the country’s short term borrowing costs jumped close to 12 per cent as international investors anticipated a political victory for the radical leftwing Syriza party.

The snap general election was triggered after Stavros Dimas, the presidential candidate backed by the prime minister, failed to win the necessary 180 votes required for the Greek parliament to elect a new president.

Global investors are concerned that the early general election will put the far-left Syriza party in power and lead to a reversal of the country’s recent economic reforms.

A recent visit by senior Syriza politicians to London sparked serious concern among investors, with one describing the party’s plans for Greece as worse than communism. Alexis Tsipras, leader of Syriza, has vowed to seek a substantial write off of Greece’s sovereign debt and increase public spending.

The yield on Greece’s three-year government bonds rose to 11.77 per cent in the wake of Monday’s vote, a record high since the bonds were issued earlier this year at a yield of 3.5 per cent.

Yields for short-term Greek debt are now higher than longer term debt, a clear indication that investors are concerned about the country meeting its near term debt obligations.

Earlier in 2014, Greece made a triumphant return to capital markets, attracting orders of more than $20bn in its first bond sale since the eurozone crisis, a success that was seen as proof of the country’s economic turnround since its multibillion euro bailout in 2012.

However, investors have become increasingly concerned about the country’s prospects as political unrest grew.

Greek prime minister Antonis Samaras had warned that Greece faces a “catastrophic” exit from the eurozone if Mr Dimas, a former EU environment commissioner, was not elected as president.

Yields on Greece’s benchmark 10-year government bonds rose to 9.6 per cent on Monday, the highest point in more than a year, while the Athens Stock Exchange fell by 10.9 per cent before regaining some ground. Shares in the country’s banks, including National Bank of Greece and Piraeus Bank, were hit particularly hard, falling by more than 10 per cent.

In the wider eurozone, investors sold out of peripheral government debt and moved towards the haven of German Bunds, pushing up yields in Italian and Spanish bonds. The Stoxx Europe 600 index was down around 0.2 per cent by mid morning while the euro was broadly flat at $1.22.

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