After the announcement that Greece's presidential elections are being pushed ahead to December 17, stocks are sinking in Athens. Bond yields, which measure the cost of issuing debt for the government, are spiking once again. Sovereign yields are breaking out of the region they've been in for the past few days, up from 7.2% to nearly 7.7%. Yields saw a recent peak just below 9% in October, when far-left anti-austerity party Syriza took a polling lead, and the government was planning to exit its bailout early. Equities on the Athens stock exchange dropped by nearly 7%, with investors reacting pretty badly to the news. They're now down by 5.76%. The presidential election is conducted by Greece's legislators, not its population. But the government needs a super-majority to install a president, which it doesn't have. Deutsche Bank's Jim Reid explains the situation here: The failure to elect a President by the existing parliament would lead to a national general election within 3-4 weeks, with the current SYRIZA opposition party leading in the polls (according to various opinion polls). So very large electoral uncertainty and the lack of an official financing backstop ensures a meaningful period of uncertainty ahead for Greece. In rounds 1 and 2 (Dec 17th and 22nd) the Government requires 200 out of 300 MPs which is extremely unlikely. In the final round (Dec 29th) they require 180 votes. Deutsche's George Saravelos also says there's a 60/40 chance of a Greek parliamentary election. With Syriza in the lead, that's a big risk for bondholders. The insurgent party wants Greece's creditors to take a major haircut (drastically cutting the value of their investment), and for existing bailout programmes to be cancelled. Join the conversation about this story »
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