Greek Markets Rattled By Political Disarray

http://www.ft.com/cms/s/0/7157a3f8-da54-11e2-a237-00144feab7de.html#ixzz2WqkGfnWs June 21, 2013 10:43 am Greek markets rattled by political disarray By Robin Wigglesworth Greek bond yields have climbed sharply as investors fret over domestic political uncertainty and an impasse between the country’s troika of official sector lenders. The benchmark 10-year bond yield of Greece rose 75 basis points to 11.6 per cent by late morning in London, while the Athens stock exchange index fell 2.9 per cent to its lowest level since early April. Greece’s small Democratic Left party could pull out of the government coalition headed by premier Antonis Samaras after the collapse of talks on resuming state television broadcasts. The abrupt shutdown of broadcaster ERT last week angered the Democratic Left’s members of parliament and caused consternation among Greece’s austerity-fatigued population. Mr Samaras said that he was determined to avoid early elections despite the row. Global markets have been rattled by the US Federal Reserve’s indication that it will start to reduce its bond-buying programme this year and end it in 2014, but most bond and stock markets regained some of their footing on Friday. In contrast, Greek bond yields have continued their ascent. Investor sentiment towards Greece is not helped by uncertainty over how to plug a funding gap in the country’s bailout programme. The FT reported on Thursday that the International Monetary Fund might suspend aid to Greece next month unless the eurozone stepped in. If the current review of the programme “is concluded by the end of July, as expected, no financing problems will arise because the programme is financed till end-July 2014”, Gerry Rice, an IMF spokesman, said in a statement. Mr Samaras’s New Democracy party and its Pasok ally jointly have 153 deputies, a slender majority in the 300-member parliament. But the departure of the Democratic Left would be a blow to a government that still has to impose deep public spending cuts and oversee a large privatisation programme. Greek bond yields have tumbled for much of the past year as hedge funds bet the debts will be spared in another overhaul of Athens’ debt burden – most likely after the German elections later this year. Taylor Scott International