ATHENS – Political instability ahead of critical Greece’s election of a symbolic President means Greek bond investors will need a strong stomach, Administrative Reform Minister Kyriakos Mitsotakis said.
Prime Minister Antonis Samaras has until February to get 180 votes in the 300-member Parliament, the threshold needed to elect a President, or the country will be forced into early national elections that could once again jeopardize Greece’s position in the Eurozone.
Samaras’ New Democracy Conservatives have only 127 seats and its partner the PASOK Socialists have 28 for a total of 155, leaving the Premier to try to persuade 25 political opponents to join sides with him against the major opposition Coalition of the Radical Left (SYRIZA) party.
If he fails, Mitsotakis said Greece faces a return to the dark days of two years ago when it nearly fell out of the Eurozone and rattled investors.
“The reality is that there will be a climate of uncertainty until February,” Mitsotakis, 46, said in an interview with the Bloomberg news agency.“Volatility is caused by the fear of snap elections and the possibility that these will be won by a party which is not normal.”
Samaras has also warned that there could be a run on the banks if SYRIZA wins as the government, increasingly frantic, tries to thwart the Leftists.
A two-year rally in Greek government bonds has fizzled out over the past month, as investors wake up to the political risks still at large in Greece as Samaras struggles to hold onto office.
Asked whether investors should just dump their Greek bond holdings until the next President has been installed, Mitsotakis said: “Don’t ask me, I’m just doing my job. Ask SYRIZA.”
“Some of the dilemmas that we had to answer in 2012 will definitely be posed again in February,” he said.. That year Greeks needed two general elections before Samaras could form a government to accept the bailout terms set by its international lenders. “Lawmakers will know what’s at stake,” Mitsotakis said.
“If Greece’s political system doesn’t show that it’s serious about its commitment to reforms, then government bond yields will remain high,” Mitsotakis said. “This should be understood by everyone involved and mostly from SYRIZA,” he said.
Greece is negotiating with its international creditors over a precautionary credit line that would be available should market borrowing costs spike after the nation exits its rescue program at the end of this year, Samaras said on Oct. 17. The credit line may consist of funds from its existing bailout, originally earmarked for recapitalizing the country’s lenders.
“We just left the hospital, so we are not ready to run a marathon. For the moment, the best we can do is walks in the park,” Mitsotakis, who worked at McKinsey & Co. before becoming a politician, said. “The credit line is this transitional stage we needed.”