As he enters a critical week for his premiership, Prime Minister Antonis Samaras has awoken the bond market to the dangers of a political rupture in Greece.
Samaras will put forward his candidate for the presidency in the first of three votes on Dec. 17 in a process that risks toppling his government. He spent the weekend trading barbs with the Syriza party that leads in the polls, setting out the consequences of letting the anti-austerity group into power, as Syriza accused him of “begging” markets to attack Greece.
The yield on the three-year bonds Greece sold earlier this year jumped more than 60 basis points in an hour on Dec. 11 after Samaras accused the opposition of reviving concerns that Greece could be forced out of the euro. The debt, which symbolized Greece’s financial rehabilitation when it was issued, closed the week yielding more than 10-year bonds, a signal of the growing risk of a default.
“The leading party could be portraying the movement as a way to scare voters,” said Yannick Naud, a money manager at Pentalpha Capital in London. “They are blaming Syriza for the move, and rightly so, and it’s probably to tell the electorate it’s our way or chaos.”
Samaras triggered the worst stock market selloff in 27 years last week when he decided to bring forward the vote in parliament on a new head of state. The prime minister will be forced to call a snap election unless he can find another 25 lawmakers for the supermajority required to confirm his nominee by Dec. 29.
Samaras wrote in an article in Real News that anxiety about Greece is justified and caused by Syriza. Syriza leader Alexis Tsipras called Samaras “the prime minister of chaos” in a speech on Saturday.
Syriza rose to prominence two years ago when it came an unexpected second in elections, running on a promise to rip up the terms of the country’s 240 billion-euro ($299 billion) from the euro area and International Monetary Fund. While the party has since moderated many of its policies, it remains committed to increasing social spending and wants the euro area and European Central Bank to write down some of their Greek loans.
The benchmark Athens Stock Exchange index dropped 20 percent last week on the prospect of further political instability, while the yields on the three-year bonds sold this year as the country regained access to international markets rose to 11.13 percent, compared with 9.15 percent on the 10-year benchmark.
“Bringing forward the presidential elections is a political gamble that may pay off,” Christian Schulz, senior European economist at Berenberg Bank in London, wrote in a Dec. 12 note. “The allergic reaction of investors to Syriza’s policies should have made clear to its leadership that markets will be unforgiving.”
In Samaras’s first attempt to elevate a candidate to the country’s ceremonial presidency on Wednesday, he will need 200 votes to succeed. Only in the final vote on Dec. 29, does the threshold drop to 180.