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Home > Investments > European

Greek crisis is ‘now more containable’

Investors see Greek crisis as containable as election uncertainty ends.

By Bradley Gerrard | Published Jun 22, 2012 | comments

Investors have said the impact of Greece’s woes on the stockmarket are more containable following the country’s success in forming a pro-bailout coalition government.

New Democracy, led by Antonis Samaras, won the election on June 17 but failed to secure an absolute majority, meaning the party was given until the end of Wednesday last week to form a coalition with other parties.

But Mr Samaras’s party has now joined forces with third-placed socialist Pasok party led by Evangelos Venizelos and Democratic Left headed by Fotis Kouvelis – forming a coalition of parties that support Greece adhering to European fiscal rules in return for receiving bailout funding.

However, the parties have pledged to renegotiate Greece’s current ‘austerity’ fiscal requirements. This could give rise to concerns that the nation might fail to secure funding in the future.

Nevertheless, fund managers said progress can now be made on the Greek branch of the eurozone crisis.

Dan Morris, global strategist at JPMorgan Asset Management, said the UK stockmarket’s relatively muted reaction to the election was “unsurprising” given the economy’s fundamental issues have not yet been resolved.

“But the news is positive for investors as the existential risk to the eurozone has receded and there is greater optimism that the crisis can be managed from here,” he said.

“Following the election, we are somewhat less concerned about the implications of Greece’s debt problems for the eurozone as a whole.

“Greece is quickly running out of cash, tax receipts have fallen and a significant proportion of the population continues to oppose the terms of the bailout, but with a pro-bailout government in place, these issues can be managed within the context of the eurozone.”

Dino Fuschillo, director of European equities at Four Capital Partners, said the election result and the formation of a pro-bailout coalition was “very positive indeed” both for the country and Europe as a whole.

“The Greek electorate made the correct choice in the elections as Syriza [the anti-bailout party] would have been a vote for the country’s suicide,” he said.

“The humanitarian and monetary cost of assistance would be far greater than the current known costs.”

Kathleen Brooks, research director for UK and Europe, the Middle East and Africa at Forex.com, said the Greek election was “a remarkably calm affair”.

However, she warned that “with the radical left anti-bailout Syriza party set to be a formidable force in opposition the prospect of Greece leaving the eurozone remains on the table”.

Apollo Multi-Asset Management fund manager Steve Brann said the group is retaining its ultra-bearish stance in spite of the Greek election result.

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