Greek Premier Mitsotakis Set for New Term, Boosting Markets
(Bloomberg) -- Greek Prime Minister Kyriakos Mitsotakis pummeled his opposition in Sunday’s national election, moving a step closer to getting another four-year term and sending markets higher on the prospect that the premier’s investment-friendly policies will continue.
Most Read from Bloomberg
Biden-McCarthy Debt Talk Ends With Optimism, But Without a Deal
Parents Sue Elite Schools for ‘Indoctrinating’ Their Kids With Anti-Racist Policies
Mitsotakis’s center-right New Democracy received almost 41% of the vote compared to about 20% for the leftist Syriza party of former premier Alexis Tsipras. The premier fell short of the threshold to immediately form a government on his own, meaning he will likely opt for another ballot in about a month rather than try to form a coalition.
The Athens Stock Exchange General Index rose as much as 7.5%. Greek bonds edged higher, dropping the yield on 10-year debt to 3.82%, the lowest level since December. Moody’s Investors Service said the outcome of the election was a credit-positive.
Voters were convinced by Mitsotakis’s pledge to build on one of the European Union’s fastest economic recoveries that has Greece on the cusp of a return to investment grade. Even though the prime minister has the option to try to form a political alliance, he indicated he would prefer a new election since he seems to have the support to secure a single-party government.
“New elections should be held as soon as possible,” Mitsotakis said on Monday, adding that it could happen as soon as June 25.
Sunday’s election was the first under a new proportional representation system that effectively means that a candidate needs around 48% of the vote to be able to form a single-party government. If a second election is held, the winner will get a bonus of as many as 50 seats, meaning that the threshold falls to about 38%, depending on the number of parties that qualify for the 300-seat parliament.
“The results were well beyond market expectations with New Democracy being the clear winner,” said Alevizos Alevizakos, managing director of Axia Ventures Athens branch. “While it’s highly unlikely that a government will be formed after this election, the next two days won’t be as volatile as previously expected.”
Voters were particularly focused on Greece’s economic transformation, which has seen gross domestic product recover to just about where it was when Greece lost its ability to repay its debt in 2010. Unemployment has more than halved from its peak of 28% and the country’s stocks and bonds have soared.
The risk premium on Greek government debt compared with Germany’s has fallen by about a third over the past year. They trade with a similar yield to Italian bonds. The rebound in the economy has set the nation on track to recover its investment-grade status after 13 years.
The economy is expected to reach €223 billion ($243 billion) this year, roughly what it was in 2010, estimates from Eurostat show.
“We rather expect a strong bounce with solid market volumes in the coming period,” said Alevizakos, who expects that New Democracy will be able to form a strong single-party government in the second election “that will be supportive of all Greek assets in the short and long term.”
The election was overshadowed by several incidents that weighed on Mitsotakis’s campaign in the run-up to the vote. These included a train crash earlier this year that left 57 people dead and a scandal in which the prime minister confirmed that his intelligence agency spied on an opposition candidate.
Still, New Democracy’s margin of victory was the largest since 1974 and its share of the vote rose slightly since the last election in 2019. Mitsotakis’s party won in all but one of the 59 electoral districts.
“New Democracy has the people’s approval to rule alone,” Mitsotakis said Sunday night. “I know how much work we have ahead of us, which requires a government that truly believes in reforms and the ability to implement them.”
(Updates market moves in the third paragraph.)
Most Read from Bloomberg Businessweek
The Man Who Spends $2 Million a Year to Look 18 Is Swapping Blood With His Father and Son
Maasai Are Getting Pushed Off Their Land So Dubai Royalty Can Shoot Lions
Japan’s New Military Might Is Rising in a Factory in Hiroshima
©2023 Bloomberg L.P.