SYRIZA Losing Greek Election
Polls have closed after Sunday’s general election in Greece and counting is already underway. Early indications are that New Democracy has won, with the anti-bailout SYRIZA party coming in a close second. Full results are not expected for several hours but SYRIZA party leader Tsipras has already conceded defeat. The euro took the news positively at the Asia open because not only does New Democracy seem likely to claim the 50 seat bonus assigned to the victor, New Democracy and PASOK together are likely to have sufficient numbers to form a coalition government (projections suggest they will command 161 seats in a 300-seat parliament). Whether such a government will ultimately be formed is another matter and it seems days of tortuous negotiation still lie ahead. Unnamed party sources told Reuters that PASOK is likely to pursue a policy of limited involvement with any new administration – offering their vote of confidence when needed but refusing to take up ministerial posts in the new cabinet. To us this does not sound like the recipe for a stable government and we would have concerns over how long such an administration could last in the face of a succession of crunch parliamentary votes over the months ahead. Eurozone Finance Ministers issued a joint statement afterwards reiterating their commitment to assist Greece, but stopping short of offering any specific concessions. The statement did however hint at some flexibility on Europe’s part by suggesting that the troika’s next visit to Athens could be a useful opportunity “to exchange views with the new government on the way forward”. We remain bearish on the euro given the political uncertainty in Greece is not likely to come to and end anytime soon and, as such, questions about Greece’s continued membership of the Eurozone are to haunt the currency into the future. Today, as well as listening for political commentary in Greece, investors are likely to keep one eye on the G20 meeting – although given Greece’s relatively benign election outcome we would be surprised if the G20 felt compelled to make any market-moving announcements.
Click here to read the full report: UBS Morning Adviser Asia
UBS Investment Bank