Greek Turmoil Could Spread – Risk of Bail-Ins in U.S. and Globally

Tuesday, December 30, 2014
By Paul Martin

By Mark O’Byrne
December 30, 2014

Greece’s financial markets are in turmoil again as a vote in parliament – failing to elect a new president – made a general election inevitable. Greek markets saw severe sell offs , with yields on Greek government bonds rising and shares prices collapsing 13% at one point yesterday and closing 7% lower on the day.

Greek bank shares collapsed by even more. Two of Greece’s largest banks, Piraeus bank and Alpha bank, shed more than 14% of their share value as concerns of bank solvency, bank runs and Cyprus style bail-ins reemerged.

Market reaction elsewhere was mixed with markets in low volume Christmas trading. Northern European stock markets, the FTSE, DAX and CAC, eked out small gains while southern markets saw renewed jitters.

The Greek result led to sell offs in Spain and Italy, which narrowly escaped the sovereign debt crisis that led to Greece’s 2010 bailout. Spanish and Italian bond yields rose, pushing Madrid’s IBEX stock market down 1 percent while Italy’s FTSE MIB fell 1.2 percent.
Greece and the risk of new Eurozone debt crisis will now – again – be a key focus for investors in 2015.

The question now is whether this will lead to wider market volatility across Europe in the run up to the Greek general election, due on January 25th, and, more importantly, what will happen after the election.

The left-wing, anti-austerity Syriza party is ahead of the incumbent New Democracy, led by prime minister Antonis Samaras, in the polls. Syriza is currently the most popular group in polls with almost 30% of Greeks saying they will vote for the anti-austerity coalition.

It will campaign on the platform of an end to austerity and a re-negotiation of Greece’s debts to the EU. This may well cause conflict with the EU and the ECB, and there is a real risk of renewed eurozone instability.

Alexis Tsipras, head of Syriza said: “With the will of our people, in a few days the bailout agreements of austerity will be history” as his group intend to renegotiate the bail-out deals.

The IMF are suspending their loans to Greece until a new government is formed.

The Rest…HERE

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