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What would happen if SYRIZA won the elections

21 May 2014 / 14:05:44  GRReporter
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Major financial credit institutions from abroad and market analysts describe the possible economic and political situation in the case that SYRIZA wins the forthcoming European elections. They forecast that Greece would enter a period of political and economic instability and fear that the Greek economy would encounter serious shocks.

The forecast in the analysis of Bank of America-Merrill Lynch

In today's analysis of the Greek economy and investment opportunities Bank of America-Merrill Lynch mentions the upcoming European elections. The Bank notes that economic growth will continue to surprise positively, but risks remain.

One of those risks is the political uncertainty because, as stated by the Bank of America, a negative result in the European elections would increase the probability of early national elections, which would be negatively perceived by the markets against the background of the political uncertainty, delays in implementing the reforms and the further delay in the negotiations to alleviate the Greek debt, involving the public sector (OSI).

The slow improvement would continue if there were no political crises

The investment bank adheres to its forecast for around a 0.3% growth in Greece in 2014, noting that the slow improvement would continue if there were no possible political crises, as the economic slowdown continues to weaken.

The risks to growth pointed out in the report include the implementation of the ambitious reform programme of the government, the debt levels that are still high as well as the political risks, especially in relation to the results of the European elections on 25 May.

Investment opportunities

Regarding the banking sector, Bank of America-Merrill Lynch pays attention to the shares of Alpha Bank and Piraeus Bank, recommending a "purchase". The Bank notes that it has long believed in the story of the recovery of the Greek banking sector, arguing that it is reflected by market estimates. "We believe that macroeconomic recovery and sector reforms will lead to the recovery of the banking sector in the period 2014-2017," reads the report.

In addition, the Bank supports its recommendation for a "purchase" with respect to the Greek telecommunications company ΟΤΕ. "Although in the first quarter it did not do anything special, we continue to believe that the underlying trends remain. The initiatives to reduce costs and debts are starting to yield results, and it is expected that they will have an even greater effect in the rest of the year," states the report.

Bank of America-Merrill Lynch has a neutral stance regarding the shares of the Greek lottery company OPAP, noting that the uncertainty remains high and much of the recovery has been exhausted in advance. In this case, it is expected that recovery will come from innovative products and cost control by the new company management.

Credit Agricole: a SYRIZA victory may shock European markets

According to Bloomberg news agency, strategic analyst at Credit Agricole Mark McCormack has sent to customers of the bank letter stating that a possible landslide victory of SYRIZA in the European elections could shock European markets.

In particular, according to Bloomberg, McCormack notes in his letter that the possible victory can be shocking to the markets in Europe in terms of assets (shares, securities, interest rates on securities, etc.), at a time when Greece is trying to implement the reforms.

The reforms will stop

The same letter states that there should not be indifference and apathy in relation to the European elections because of the possible risks to these assets, the biggest threat being the winning of a substantial share of the European vote by anti-European parties, thereby reversing some of the progress made in the field of economic reforms.

According to the article in Bloomberg, the greatest danger comes from Greece due to the probability of early elections if SYRIZA wins the majority of the votes.

Credit Suisse: SYRIZA did not do well

It is a well-known fact that markets were impatient to see the first "crash test" in the local elections in Greece. This was because, as repeatedly stated by analysts, a possible change in the political arena would cause corresponding shocks.

SYRIZA leader Alexis Tsipras

The message of Swiss Credit Suisse, which defines the situation as "slightly positive" is indicative. It also reads,

"Sunday elections brought no great surprises, which should be considered as a slightly positive development for the country, as this reduces, in the short term, the uncertainty due to the instability on the political scene."

Furthermore, the Swiss bank states that SYRIZA performed relatively well in Athens and Attica, but it is unclear whether it will be able to win in a landslide in the second round next Sunday, adding that candidates supported by, or coming from, the parties of the ruling coalition won in large areas in the country and in the municipalities.

Tags: Local electionsEuropean electionsGreeceBanksForecastsMarketsSYRIZA
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