Tired of the Euro Crisis, or thought that it had subsided? Prepare to get more of it – the Greek parliament has failed to elect a new president on the third and final vote, remaining short of 12 votes to secure the required supermajority of 180 MPs.
The immediate result is that Greek stocks tumbled another 8%, while Italy and Spain are lower by about 2.5% at noon in London.
The Greek electorate will face snap parliamentary elections early 2015 with populist leftist party SYRIZA as the most likely winner, according to the latest batch of polls of the electoral sentiment of voters.
The party of current prime minister, Antonis Samaras, New Democracy is trailing in second and the race appears to be tight. The outcome will be largely dependent on how exactly will Alexis Tsipras propose to solve the country’s sovereign debt problems.
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While this may not be of direct impact to the forex industry today, the implications of a prospective Greek default are likely to have profound effects on the Cypriot banking system (again), while the political instability could spread to other countries under IMF/EU bailout programs.
Under the constitution, the parliament will get dissolved within the next 10 days and a date for the new elections will be announced. The polls are likely to be held sometime between late January and early February.
Public support for the anti-austerity movement led by SYRIZA has already moved the benchmark Athens Stock Exchange Index lower by 32% this year, which is only behind the Russian stock exchange. The trading session in Athens today marked a new multiyear low at 756 points, well below the recovery highs earlier this year around 1,380 points.
Greek snap elections are likely to take over the attention of the markets in the beginning of the new year bringing additional volatility to major currency pairs and projecting a tough future for Cyprus incorporated companies, with the spillover effects from Greek political instability spreading to the most exposed parts of the European Union.
A spokesperson of the IMF confirmed, “Discussions with the Greek authorities on the completion of the 6th review of the program that is being supported by an Extended Arrangement will resume once a new government is in place, in consultation with the European Commission and the European Central Bank. Greece faces no immediate financing needs.”