Earlier today, the Greek stock market crashed and bond yields spiked after their government surprised investors with a snap presidential vote. The election, originally scheduled for the new year, will now be taking place next week. This news, announced yesterday, caused the Athens Stock Exchange to close down around 12.8 percent on Tuesday, with the yield on Greek 10-year government debt rising to 8.158 percent. The banks of Greece were among the worst hit; the National Bank of Greece closed down around 20 percent, while Attica was down 26 percent. Yesterday, euro zone finance ministers signaled that they were in favor of granting Greece a two-month extension to its bailout program, which they’ll be asking for on Tuesday.
Prime Minister Antonis Samaras brought the election forward to select a new president after he failed to win EU backing over his 2015 budget. The first of three voting rounds will be held on December 17. A failure by Samaras to get his candidate elected for president could trigger early elections. As a condition for an international aid program worth 240 billion euros, the Greek government has implemented unpopular austerity policies. While the government has no desire to impose additional austerity measures, a lack of reform progress could mean that Greece doesn’t receive its last bit of aid, and an exit to their bailout program will be delayed.
Some, including former IMF board member Miranda Xafa, see this as a potential strategic move by Samaras to neutralize the threat posed by opposition parties, including the left-wing, anti-austerity party Syriza. Earlier, Syriza declared that they would tear up the bailout agreement, refusing to make a deal with the so-called “troika” of international organizations which oversee Greece’s bailout: the European Commission, International Monetary Fund and European Central Bank. John Milios, an economist for Syriza and a parliament member, claimed that the presidential vote was the beginning of a process that would result in early general elections.