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Macro Flash: Greece<br />
We don’t expect major impact of French elections before June<br />
Greek Elections – Uncertainty Remains…<br />
Analyser<br />
The facts Greek political leaders will meet for a second day today in a bid to form a government, with the mandate being<br />
handed to Alexis Tsipras, head of Syriza, after New Democracy leader Antonis Samaras said he failed to forge agreement<br />
with the two largest parties. Alexis Tsipras will meet with President Karolos Papoulias today at 14:00 local time (12:00 UK).<br />
Our analysis: More specifically, a first round of government talks in Greece ended in deadlock after the top-seeded<br />
conservative party failed to entice parties opposed to the country's EU-IMF bailout deal to join a coalition. Conservative<br />
New Democracy leader Antonis Samaras said his efforts to form a national salvation government had failed, meaning that<br />
the leftist Syriza party would now be tasked with forming a government. Antonis Samaras stated that "I did whatever I could<br />
to secure a result but it was impossible", while he also stated that "I informed (head of state President Carolos Papoulias)<br />
and returned the mandate". Antonis Samaras was rebuffed by the second-place leftist Syriza party and the small<br />
Democratic Left group, while the nationalist Independent Greeks and the Communist party refused to meet with him. Thirdplace<br />
socialist Pasok, formerly in a coalition with New Democracy, agreed to cooperate but only if the leftists also joined a<br />
salvation government. Note that Syriza leader Alexis Tsipras will be summoned by President Karolos Papoulias today and<br />
given three days to form a government. Finally, Alexis Tsipras has said he would seek to form a left-wing coalition to reject<br />
the loan agreement's "barbaric" measures, noting that "we will exhaust all possibilities to reach an understanding, primarily<br />
with the forces of the Left" on forming a government.<br />
Recall that Greek elections produced a fragmented parliament with no single party being able to form a majority<br />
government. With all votes counted, conservative New Democracy (ND) gets 18.85% and 108 seats in the 300 seat<br />
Parliament, radical left wing Syriza (coalition of left) 16.78% and 52 seats, socialist PASOK 13.18% and 41 seats, far-right<br />
Independent Greeks 10.60% and 33 seats, communists KKE 8.48% and 26 seats, extreme right (nationalist) Golden Dawn<br />
6.97% and 21 seats and the left-wing Democratic Left party 6.09% and 19 seats.<br />
The two pro-European parties (PASOK & ND) supporting the former government of Mr. Papademos failed to form a<br />
coalition government as their share of votes is less than 50% and their cumulative number of seats in the parliament less<br />
than the minimum majority required of 151 seats. According to the Greek Constitution, the leaders of the 3 biggest parties<br />
will receive in-turn a three-day mandate to try and form a government. If efforts fail, and after these nine days, the<br />
President of the Republic will call all parliamentary leaders together to see if a government can be formed. If leaders fail to<br />
agree, then a new round of elections will be called most possibly within mid-June, a scenario which, in our view, is the most<br />
likely.<br />
We also note that according to several press reports, EU& IMF officials said that the official sector will delay the<br />
disbursement of the bail-out funds until the new program is agreed adding that Greece needs to stick to its fiscal<br />
consolidation program - which includes new austerity measures (of EUR 11-12bn for FY13&FY14) in June. Also, according<br />
to the same sources, the Troika will not return to Greece before a new government is formed, while the new government<br />
will need to stick to the plan agreed upon and illustrate and propose the measures that will allow the country to meet its<br />
deficit targets for FY13 and FY14.<br />
Conclusion & Action: As far as financing needs are concerned, press reports mention that Greece will receive the EUR<br />
5.3bn from the bail-out plan in May in order to re-pay a EUR 4.5bn bond held by the ECB and a EUR 435m bond issued<br />
under foreign law which was under the PSI (bond exchange) umbrella and its holders do not accept the exchange offer<br />
(haircut). Same sources mention that a Greek official from the Ministry of Finance said that Greece‟s cash resources are<br />
adequate to cover the country‟s needs up until mid to late June. We also note that there are no major bond redemptions<br />
within July and August. This gives some time to Greece‟s political leaders but a final solution has to be taken soon as there<br />
are other important issues that need to be resolved, with the most important being the recap terms and procedures of the<br />
Greek banking system.<br />
Analyst(s): Konstantinos Manolopoulos +30 210 81 73 388 KManolopoulos@ibg.gr<br />
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Page 9 of 80 European Securities Network<br />
Please refer to important disclaimer on the last page
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