SHAFAQNA- Antonis Samaras failed to round up enough votes to back his party’s candidate for president
Fears of a fresh Greek crisis were ignited on Monday after Athens called a snap general election that could bring the anti-bailout Syriza party to power and put the country on a collision course with international lenders.
Investor concerns were revived after the Greek parliament rejected Prime Minister Antonis Samaras’s nominee for president, automatically triggering an election which is to be held on January 25.
Monday’s dramatic events revive dormant questions about Greece’s place in the eurozone, just two years after the country’s debt crisis nearly triggered a break-up of the currency union and shook the European project to its core.
It comes with much of the eurozone struggling with weak growth, the rise of populist anti-EU parties and widespread disenchantment with the politics of austerity.
Investors took fright at the prospect of a victory by Syriza, which has pledged to write off much of Greece’s debt and renegotiate the terms of its bailout. The Athens bourse fell almost 11 per cent to a two-year low before regaining some ground. Greek 10-year bond yields jumped to a year high of 9.8 per cent while the government’s short-term borrowing costs hit a record high of 12 per cent.
Spanish and Portuguese bond yields also rose as investors moved out of Europe’s indebted southern periphery into the haven of German debt, pushing the yield on Germany’s 10-year bonds to an all-time low of 0.54 per cent.
Across the wider eurozone the prospect of political instability also led to losses on Italian and Spanish stock markets.
EU officials have watched the rise of Syriza with growing alarm. Earlier this month, Pierre Moscovici, the EU’s top economic official, warned that any attempt by Greece to avoid repaying its debts would be “suicidal”.
Mr Samaras’ nominee Stavros Dimas, a former EU commissioner, captured 168 votes in Monday’s decisive third ballot, 12 short of the required three-fifths majority after a weekend of frantic backroom politicking failed to round up additional votes from independent lawmakers and small opposition parties.
A sombre-looking Mr Samaras said in a televised statement: “It’s time for voters to do what parliament couldn’t — end uncertainty and restore stability so that we can continue with reforms and make a decisive exit from the bailout.”
Greece’s four-year bailout was due to finish this month but was extended for two months by the EU and International Monetary Fund to complete a final progress review and arrange a precautionary credit line from the European Stability Mechanism, the eurozone’s bailout fund.
“Be optimistic and cheerful, austerity will soon be over,” said Alexis Tsipras, Syriza’s firebrand leader, as he left parliament after the vote. “The Samaras government which looted society and decided to take further austerity measures is finished.”
Mr Moscovici warned Greek voters on Monday that backing an anti-EU, anti-austerity party could hinder the country’s recovery. He said: “A strong commitment to Europe and broad support among the Greek voters and political leaders for the necessary growth-friendly reform process will be essential for Greece to thrive again within the euro area”.
Commenting on Monday’s vote, Wolfgang Schäuble, Germany’s finance minister, warned that new elections “will not change any of the agreements made with the Greek government”. “Any new government must keep to the contractual agreements of its predecessor,” he added.
Opinion polls at the weekend gave Syriza a lead of 3-4 percentage points over Mr Samaras’s centre-right New Democracy party, but pollsters say it is unclear whether this would be sufficient to ensure an outright majority at election.
Though some peripheral economies were rattled, market reaction across the wider eurozone was muted, with the euro broadly flat. The currency was up 0.2 per cent to $1.2208 by 4pm GMT.
“Athens is no longer the tail that can wag the Spanish and Italian dogs,” said Nicholas Spiro of consultancy Spiro Sovereign Strategy. “Or at least not to the extent that markets perceive Greece’s political crisis as one which poses a systemic threat to the eurozone.”
However, Mujtaba Rahman, head of European analysis at Eurasia Group, a risk consultancy, said: “The vote now introduces months of domestic investor uncertainty with the risk of spillover to broader Europe, too. This will only be manageable if the ECB undertakes sovereign bond-buying as markets currently expect.”
In recession-bound Italy, where investors have become increasingly nervous about the possibility of snap elections, Prime Minister Matteo Renzi insisted that he would not be seeking an early poll.
In his first end-of-year press conference as prime minister, Mr Renzi sought to damp speculation that Italy could face the same difficulties as Greece when parliament votes for a new president when Giorgio Napolitano steps down in the new year.
Mr Renzi insisted he had “the numbers” to get through a vote on Mr Napolitano’s successor. “The legislature will last until 2018,” he said, dismissing fears that Italy would suffer “contagion” from Greece’s snap election.