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Greece Heads Back To The Polls: Full Sunday Election Preview
Greece Heads Back To The Polls: Full Sunday Election Preview
For months on end, all anyone could talk about was Greece. Throughout the spring and summer, the country’s fate in the eurozone was considered the main risk to global markets if not for what the financial fallout from a Grexit would be (that risk was largely confined to the public sector), then for what a Grexit would mean for the future of Europe’s fragile currency union.
Then, a funny thing happened. Everyone forgot about Greece.
On the heels of a final, dramatic showdown in Brussels that pitted PM Alexis Tsipras (who came in wielding a referendum “no” vote from his people) against German Finance Minister Wolfgang Schaeuble and saw Greece finally capitulate after a weekend of “mental waterboarding,” the world seemingly accepted the fact that Athens will remain a debt serf for decades to come, and although the issues of debt relief and bank recapitalization remain contentious, it seems that a Greek exit is no longer on the table.
Late in August, Tsipras resigned, setting in motion a series of events which would lead to snap elections. Again, the news was greeted with little fanfare as, by that point, the market had turned its attention to China, its currency, its stock market, its economy, and how it would all factor into the Fed decision in September.
Well, as we head into the weekend (liftoff-less, still), it’s worth noting that Greece is having an election on Sunday, and although the outcome is unlikely to change the course of the bailout deal, black swans wouldn’t be black swans if they were easy to spot ahead of time and if the first half of the year taught us anything, it’s that “inconsequential” things like Greek politics actually do matter for markets, and it’s with those two considerations in mind, that we present Bloomberg’s four scenarios for the Greek election outcome.
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Greek Bonds Tumble As Tsipras Threatens Snap Election
Greek Bonds Tumble As Tsipras Threatens Snap Election
10 year Greek bond yields are spiking this morning (and prices therefore plunging) as trading actvity picks up in the dormant peripheral capital markets. The 2025s are downover 5pts from their last traded price back in late June with yields spiking back up toward 12.5%. This derisking comes after, as we detailed earlier, not only is the Greek economy collapsing but while Brussels is “satisfied with the smooth and constructive cooperation with the Greek authorities and that should allow us to progress as swiftly as possible,” Greek PM Tsipras is threatening snap election as rebellion within ‘his’ party grows.
Volume and actvity picks up in GGBs and the price plunges…
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Put simply, there seems to be a very real possibility that the Syriza rebellion will gather enough steam in the coming weeks to materially derail discussions. This is then a race – Tsipras needs to formalize the new program before Lafazanis (and perhaps Varoufakis) foment enough discontent to make a meaningful push to head off implementation.
And with that, we’ll close with the following sound bites from Kathimerini which sum up the situation quite nicely.
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Greek Stocks Crash, Default Risk Spikes After PM GREXIT Comments | Zero Hedge
Greek Stocks Crash, Default Risk Spikes After PM GREXIT Comments | Zero Hedge.
Just 2 short months ago we noted S&P’s warning that Greece will default again within 15 months and following comments by Prime Minister Samaras that the market’s drop is due to fear that Syriza will win an early election and seek a Greek exit from the Euro. Pressuring parliamentarians and the public alike, he stated “the choice is simple,” warning that Greek financing needs are only covered through the end of February without further aid from the EU (but we thought they were ‘recovered’). Greek stocks have crashed further, Greek default risk has spiked, and 3Y bond yields are now well north of 10% (138bps inverted to 10Y).
As Bloomberg reports,
Greek PM Antonis Samaras says country’s financing needs covered until end-Feb, in comments to lawmakers of his party in parliament today.
Greece will get next tranche of its bailout loan; if we have elections everything is “up in the air”
Markets react to possible Syriza election win, fall because they fear Syriza: Samaras
Samaras calls on all Greek lawmakers to assume their responsibility; says choice is simple, president or early elections
Dimas is excellent candidate for presidency: Samaras
Credit line to shield Greece’s first steps: Samaras
The result:
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