The Greek stock market declined Monday morning behind political and economic turbulence.
Monday, December 29, 2014
Prime Minister Antonis Samaras’s presidential candidate, Stavros Dimas, was unable to lock in parliament’s backing during a vote on Monday. As a result, Greece’s parliament must be dissolved and a snap election is to be held at the end of January.
Analysts are primarily concerned that Greece’s bailout and austerity programs will cease, should the far-left Syriza party win in the general election.
“There are many more elections to come in countries that have suffered most from the austerity, such as Spain, Italy and Portugal. Should we see a significant rise in anti-austerity parties, the eurozone could face many more problems in the coming years,” Craig Erlam, market analyst at Alpari UK, told MarketWatch.
Stock indices in Greece, which were not particularly strong to begin with, saw further declines after the government’s candidate was rejected. The Athex Composite started the session down 5.4% but fell over 11% after the parliament vote. Banking stocks were the most heavily impacted. Eurobank Ergasias SA dropped 12%, Piraeus Bank SA declined 7.9% and Attica Bank SA lost 11%.
Eurozone could withstand a Greek crisis
With the troubling news out of Greece, other European indices showed volatility, according to The Wall Street Journal. The Stoxx Europe 600, France’s CAC 40 and Germany’s DAX all dropped 0.7% to 0.8% since the day’s open. Some investors fled Southern European indices, causing Italy’s MIB and Spain’s Ibex to fall 2.5% and 2.2%. However, other analysts are confident that Greek volatility would not spread to the rest of the region.
“Europe has built up its defenses against contagion risks with the European Stability Mechanism support funds and the readiness of the European Central Bank to do what it takes to keep all reform countries in the euro,” Holger Schmieding, chief economist at Berenberg Bank, told The Wall Street Journal. “Also, many peripheral countries such as Spain and Ireland are largely out of the woods. As a result, a tragedy for Greece would probably not turn into a systemic crisis for the eurozone as a whole.”
Opposition party Syriza currently leads in the polls, but Greek investors are hopeful that voters will not damage the nation’s bailout program by electing the far-left party’s candidate.
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