Greek stocks fell more than at any point during Europe’s debt crisis today after Prime Minister Antonis Samaras gambled his political future on bringing forward a parliamentary vote on a new head of state.
Greek stocks are now down 13% – the biggest single-day drop since (drum roll please) the crash of 1987… led by total carnage in Greek banks (down 15-25% on the day). Greek bond yields exploded, 3YR +183bps to a new post-bailout high at 8.32% (and inverted to 10Y).
Unless Samaras can persuade 25 opposition lawmakers to support his presidential choice, Samaras will be forced to call a parliamentary election that anti-austerity party Syriza would be favorite to win.
“Investors have taken a second look at Syriza and understood that at this point in time it’s more radical than the traditional left in Greece,” said Nicholas Veron, a fellow at the Bruegel research institute in Brussels. “If Syriza takes over it won’t be a smooth ride.”
Less than a month before Samaras had hoped to lead Greece out of the bailout program that has ravaged the country for the past four years, the resistance to his policies is fueling doubts about whether he can stay the course. While Syriza has pledged to stick with the euro, its plans to roll-back Samaras’s budget cuts evoke memories of the financial chaos that threatened to bust apart the currency union in 2012.