Instant View - Greek pro-bailout parties set to win slim majority


  • World
  • Sunday, 17 Jun 2012

LONDON (Reuters) - Parties committed to Greece's multi-billion-euro bailout are on course to secure a slim parliamentary majority on Sunday, according to an official vote projection from the interior ministry.

The projection showed New Democracy taking 29.5 percent of the vote, with SYRIZA in second place with 27.1 percent. The Socialist PASOK followed in third place with 12.3 percent.

The result translates into 128 seats for New Democracy and 33 seats for PASOK.

ION-MARC VALAHU, FUND MANAGER, CLAIRINVEST, GENEVA

"If the results are confirmed, it will be a relief because in the short run the worst has been avoided for Greece and for the EU (European Union). In addition, the second Greek elections have helped convince other EU members that Greece cannot survive with austerity measures alone.

"The markets should stabilize in the short-term, as can be seen already from the euro moving above $1.27. Having said that, the crisis is far from over and the next few weeks are really heavy in meetings and important decisions that have to be made by EU members to preserve the integrity of the zone.

JACK ABLIN, CHIEF INVESTMENT OFFICER, HARRIS PRIVATE BANK, CHICAGO

"Tension is easing somewhat, although we're still in the rhetoric stage. The apparent results appear to be buying both sides more time."

FRANCOIS SAVARY, CHIEF INVESTMENT OFFICER, REYL, GENEVA

"The possibility of a New Democracy/PASOK coalition is a good thing. Germany seems to be opening the door to a renegotiation of the Greek programme. That would be a positive factor for the markets but we also have to look at the issues of growth and Spain. New injections of liquidity will be necessary. The Bund may suffer from the fact that supporting Greece will cost Germany. The next stage is the G20 meeting and decisions over injecting fresh liquidity. So yes, it could be a relief for markets but it's not the end of the problem."

DOUG ROBERTS, CHIEF INVESTMENT STRATEGIST, CHANNEL CAPITAL RESEARCH.COM, SHREWSBURY, NEW JERSEY

"At this point we have ruled out a definitive solution to the situation one way or another so it means there's going to be some compromises. Most probably they will try to form coalitions and the real question is with the horse-trading how stable is it. But right now it's more like kicking the can down the road. Either way you're not talking about a stable situation."

PETER CHATWELL, RATE STRATEGIST, CREDIT AGRICOLE, LONDON

"It looks to me like they (New Democracy) have potentially got enough seats to form something with PASOK. So, I guess this is likely to be seen as a positive result as it opens the door for negotiation on putting together a pro-bailout coalition."

"It gives the market a pretty clear idea of what to expect - let's assume a pro-bailout government is formed, we'd have the pro-bailout government and SYRIZA being a strong and vocal opposition, and we know what line, roughly, they would take."

"It should be positive for risk. I would expect it to be seen as one of the best outcomes there could have been, given some pretty lowly expectations."

"It's difficult to express relief in the bond market because you can't really express it in Spanish and Italian debt because Spain fortunes are very much tied to their own actions and, just by the market mechanism, Italy is closely tied to Spain's outcomes. So really all you can expect to see is some flows back out of dollar assets into European assets and little by way of a boost for the periphery. If we see a rally in the periphery I don't think it's going to be a sustained one. Looking at Spain for example, there's supply this week so if there is a rally in Spanish debt I expect there to be a fair appetite to sell into that and use it to set up for the auction."

On yield spread between 10-year German and U.S. government bonds: "I would expect to see a bit of re-widening. I believe it was slightly overdone last week. The reason the Bund yield has been happy to stay up at the 1.5 percent level was this uncertainty on Greece so perhaps once the market becomes it normal realistic, or pessimistic, self we could see Bunds rally again back below 1.50 (percent).

"The immediate reaction won't be Bund yields going down, but I expect that once the initial little risk-on rally has taken place then we will see the German yield curve and most core yield curves bull flattening again. We're not out of this bull-flattening phase yet, this is just a stepping stone and though we didn't fall off this one, there's still plenty of risks within the euro zone."

INNOCENZO CIPOLLETTA, CHAIRMAN, UBS ITALIA SIM, ROME

"The Greek vote is favourable for further negotiations with the EU, and so it's the more favourable for the markets. Markets are betting today on which countries keep or do not keep the euro. It could be a turning point if the markets believe that Greece will stay in the euro zone. If markets continue to bet that the euro will not last, this will mean trouble for Greece, Italy and everyone else."

DARAGH MAHER, CURRENCY STRATEGIST, HSBC, LONDON

"What stands out is how close SYRIZA came... so we expect some robust opposition to the austerity measures. Markets will be concerned about how narrow the margin of victory was for ND (New Democracy) and any gains in the euro and other markets will be limited."

NICK STAMENKOVIC, BOND STRATEGIST, RIA CAPITAL MARKETS, EDINBURGH

"They might just be able to cobble together a government but it's going to be extremely fragile. The New Democracy lead over Syriza is marginal. Consequently, any ability for them to put through any significant policy changes is going to be severely limited."

"Any relief in the markets is going to be very short lived but at least for now the worst case scenario has been avoided. You might see initial relief when investors realize Syriza didn't win and so obviously the chances of Greece leaving the single currency have dissipated significantly and that will bring some relief, particularly for equities but also for risk markets in general. But the initial reaction will be pretty short lived when people realize the underlying situation hasn't really changed. The market is going to be concerned that we could be back at the same situation again in a few months time i.e. another election."

MICHAEL DERKS, CHIEF CURRENCY STRATEGIST AT FXPRO

"The consolation of this scenario will be that the short-covering in the euro will continue and I would not be surprised if the euro rises above $1.27 in Asian trade."

ACHILLEAS GEORGOLOPOULOS, RATE STRATEGIST, LLOYDS BANK, LONDON

"It looks like they (New Democracy) might just make it. It will be treated (in a) cautiously optimistic (way) by markets. We are not going to have a very strong reaction...there will be cautious risk-on as some stress will ease in markets but we don't have a government yet."

"So tomorrow Spanish yields should open lower but then the markets will say we got the first part but it all depends on how soon we'll get the new government. The market will soon be focused on other issues - whether we get a smooth transition, the problems in Spain specifically, the G20 and the FOMC meeting."

GEORGE TSAPOURIS, INVESTMENT STRATEGIST, COUTTS, LONDON

"If that will be the final result, that is the best news from a market perspective."

"You could see a rally (in equities and euro) because the chances of a Greek euro exit are low and there is a lot of short positioning. The rally will come from short covering. The market that will do the best will be the Greek equity market."

"There is a lot of pressure to form a government now - they cannot afford another election, because numbers suggest that they will run out of money in July. I think they (ND and PASOK) will form a government ... (but) it will be a weak coalition.

"The chances of Greece exiting in the next few months are going down but the problem is not solved, all that might come back in six months."

(Reporting by William James, Anirban Nag, Emelia Sithole-Matarise, Toni Vorobyova, Sudip Kar-Gupta in London, Steve Scherer in Rome, Edward Krudy and Richard Leong in New York; compiled by Swaha Pattanaik)


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