Narrow win for bailout parties gives euro respite

Monday 18 June 2012

THE euro briefly rose after Greek election results showed parties committed to its debt bailout plan claiming victory, but analysts warned that the slim parliamentary majority was not enough to appease jittery stock markets.

guido WESTERWELLE: German foreign minister is standing firm. sECOND PLACE: The Syriza bloc led by Alexis Tsipras conceded defeat. Picture: Yorgos Karahalis/Reuters

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Renee Maltezou and Greg Roumeliotis

Syriza bloc, the radical leftists led by Alexis Tsipras who had vied for first place, conceded defeat to the conservative New Democracy, in a result that keeps the indebted country in the eurozone.

In early trading in Australasia, the euro rose from about $1.2655 on Friday to about $1.2730 – its strongest level since May 22 – according to Reuters data.

But the euro pulled back to around $1.2690 by just before 9pm UK time, as investors were uncertain about what shape a coalition government may take. Against the yen, the euro rose to 100.45 yen, before edging back to around 100.00 yen.Daragh Maher, currency strategist at HSBC in London, sounded a note of caution.He said: "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 New Democracy and any gains in the euro and other markets will be limited."New Democracy leader Antonis Samaras, who said Greeks voted to stay in the euro, said last night he wanted to form a coalition government as quickly as possible.Imre Speizer, a senior market strategist at Westpac, added: "It's positive so far for the market, and risk currencies are opening higher."New Democracy has taken first place, but we don't know what the coalition's going to look like, so we still do have some uncertainties remaining and any gains should be limited."After five years of recession and more than two years of acute crisis, the Greek population has been undergoing its severest test since the overthrow of the military dictatorship in 1974. The streets of central Athens have been scarred by waves of protests, some hospitals are short of medicines and reports of suicides caused by the crisis have become routine.Even during polling yesterday, there was evidence of unrest when about 10 men armed with sledgehammers and wooden bats attacked a polling station in Athens, wounding two policemen and setting fire to the ballot box.The attack – which occurred half-an-hour before polls closed – took place in the Athens neighbourhood of Exarhia, a traditional haven for leftists and anarchists near the city centre.Greece's lenders say a new government must accept the strict conditions of the bailout – on top of a €110 billion package – or funds will be cut off, driving Athens into bankruptcy.New Democracy leader Antonis Samaras has called for an extra two years to make the cuts demanded of his country. But Greece's eurozone peers are prepared only to tinker with the deal and then only with a government firmly committed to the bailout. "There is no way out of the reforms. Greece must stick to what has been agreed," German Foreign Minister Guido Westerwelle said.World leaders gathering at a G20 summit starting in Mexico today will be closely monitoring developments in the country and G20 sources have already said central banks from major economies stand ready to take steps, including co-ordinated action, to stabilise markets if the election triggers a financial storm or public panic.Opinion polls show Greeks, weary and disillusioned after five years of deep recession, overwhelmingly favour remaining in the euro, but there is still bitter anger over repeated rounds of tax rises, slashed spending and sharp cuts in wages and pensions."I voted for the bailout because these are the terms that will keep us in Europe," said 66-year-old English teacher Koula Louizopoulou after casting her ballot in Athens, hinting that she had chosen New Democracy."It's the first time I feel depressed after voting, knowing that I voted again for those who created the problem, but we don't have another choice," she added.

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Narrow win for bailout parties gives euro respite

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