27 Jan 2015
Divergence between Syriza and troika may flood marked with volatility – Nomura
FXStreet (Barcelona) - The Research Team at Nomura shares the probable market implications of Syriza’s win in the Greek elections, noting that in the medium-term the divergence of views between Troika and Syriza will flood markets with more volatility.
Key Quotes
“In terms of the immediate market implications, in our view, this result will be viewed negatively by the market for a number of reasons: a) SYRIZA’s success reduces the need for/influence of a moderate party in any coalition; b) ANEL now looks like a potential (radical) coalition partner for SYRIZA; and, c) the large difference is likely to be read as a mandate for a tough negotiating line, thus increasing the likelihood of a confrontation with Europe.”
“From a more medium-term (multi-week) perspective, the first crash-test of the new Greek (SYRIZA-led) government will be the 16 February Eurogroup, when the Greek government will have to ask for yet another extension of the current loan agreement in order for the Troika to be able to continue the current review.”
“To-date SYRIZA’s position on how they intend to manage their relations with the Troika are at best obscure, therefore that date will be crucial in terms of revealing the negotiating line of the Greek government. An aggressive stance along the lines of requesting an extension in order to revise the programme’s parameters would be a very negative signal, while a programme extension accompanied by an invitation to the Troika (in some form) to return to Greece would be a constructive step.”
“In any event, we stand by our view [..] that the divergence of views between SYRIZA and the Troika is so large to be unbridgeable implying more volatility in the coming weeks and months, as the market is called to re-price the risk of an ultimate confrontation with Europe.”
Key Quotes
“In terms of the immediate market implications, in our view, this result will be viewed negatively by the market for a number of reasons: a) SYRIZA’s success reduces the need for/influence of a moderate party in any coalition; b) ANEL now looks like a potential (radical) coalition partner for SYRIZA; and, c) the large difference is likely to be read as a mandate for a tough negotiating line, thus increasing the likelihood of a confrontation with Europe.”
“From a more medium-term (multi-week) perspective, the first crash-test of the new Greek (SYRIZA-led) government will be the 16 February Eurogroup, when the Greek government will have to ask for yet another extension of the current loan agreement in order for the Troika to be able to continue the current review.”
“To-date SYRIZA’s position on how they intend to manage their relations with the Troika are at best obscure, therefore that date will be crucial in terms of revealing the negotiating line of the Greek government. An aggressive stance along the lines of requesting an extension in order to revise the programme’s parameters would be a very negative signal, while a programme extension accompanied by an invitation to the Troika (in some form) to return to Greece would be a constructive step.”
“In any event, we stand by our view [..] that the divergence of views between SYRIZA and the Troika is so large to be unbridgeable implying more volatility in the coming weeks and months, as the market is called to re-price the risk of an ultimate confrontation with Europe.”