Market fears ease after Tsipras calms on Grexit

As Greece braces for national elections in twelve days time, the Greek financial markets seem to have steadied on Monday in a sign that investors are now less concerned that the result could lead to the country dropping out of the euro.

In late trading in Athens, the yield on the Greek 10-year bond was down 0.66 points at 9.32% and the main stock index was up 4.3%.

Despite the improvements, bonds and shares are still faring worse than when the election was called at the end of 2014, according to the Associated Press.

Opinion polls indicate the January 25 election will see the anti-bailout Syriza come first ahead of conservative Prime Minister Antonis Samaras’ New Democracy and his fragile coalition. However, easing market nerves somewhat, Syriza leader Alexis Tsipras said in a weekend interview in the weekly Realnews that a government headed by his party would honour upcoming debt obligations in March, calming fears that his left-wing party could unilaterally renege on the country’s bailout loans.

Syriza wants more than half of the bailout debt of 240 bln euros be cancelled, arguing that a sustained recovery after six years of recession is impossible otherwise.

Syriza would probably need to form a coalition to govern, but its chances of an outright win are increasing as voters focus on the two main parties and ignore alternatives.

“There are indications that the first two parties are pulling ahead ... leaving the small ones behind,” Alexis Routzounis of the Kapa Research polling company told the Associated Press.

The polarising electorate, he argued, reflected a clear choice facing voters between taking a consensual or confrontational line with bailout lenders.

“What counts now, is whether the 12-15% undecided voters will split with the mindset of a two-party race, or scatter to the smaller parties they previously supported,” Routzounis said.

Meanwhile, National Bank of Greece (NBG) ADRs closed up 6.37% to $1.67 in New York on Monday after Tsipras said that Greece would remain in the Eurozone.

“It’s clear from any point of view that the subject of Greece leaving the euro simply does not exist,” he told Realnews.

A report in a German magazine last week had claimed that Germany would let Greece leave the Eurozone, with Chancellor Angela Merkel and Finance Minister Wolfgang Schaeuble adding that Greece’s departure, or a ‘Grexit’, from the economic and monetary union would be “manageable,” according to Der Spiegel.

The report also claimed the German government considers Greece’s exit “inevitable” if Tsipras comes to power and if the country does not service its debts.

Prime Minister Samaras said in a speech two weeks ago that a victory for Tsipras and Syriza would cause default and Greece’s exit from the Eurozone, according to Bloomberg.