Splintered Greek politics likely to rattle markets

Page last updated at 14:47 GMT, Sunday, May 6, 2012 - 19:47 EST

Reuters:

Investors are likely to react with alarm to the electoral drubbing handed to Greece's main parties but analysts said there could be a silver lining if Europe is forced to think more seriously about fostering growth.

Greece's PASOK and New Democracy parties - supporters of the country's bailout programme - looked set to capture well below 40 percent of the vote between them on Sunday, making it tough to form a stable government and throwing the country's future in the euro zone into doubt.

France also elected a new president on Sunday, Francois Hollande, a Socialist who has pressed for an end to German-led austerity policies, a sign that Europe's electorates are speaking with one voice.

It is the Greek vote which will dominate financial market attention as investors gauge whether the twice bailed-out country could renege on its debt-cutting terms and throw the whole currency bloc back into turmoil.

The government bond market is likely to feel the impact most keenly with a risk that pressure on other vulnerable euro zone states will increase, sending their borrowing costs higher.

Read the whole story: Reuters