German Elections Could Halt Greece ETF Rally

The Global X FTSE Greece 20 ETF (NYSEArca: GREK) has gained 10.8% in the past month, but Friday’s loss of 3.6% could be a sign that traders are ready to take profits in the volatile, lone Greece fund. Some of GREK’s Friday woes can be tied to an overall dismal day for stocks that saw international ETFs absorb significant selling pressure, but there is more to the story with GREK.

Germany, the Eurozone’s largest economy, holds national elections Sunday. It appears that Chancellor Angela Merkel will retain her position, but at stake is more than just Merkel winning reelection. While Germany has not been shy about wielding its heft and power during often trying negotiations to recapitalize financially erstwhile Eurozone nations like Greece, Merkel has largely avoided talking about that subject in her campaign.

The reason: Most ordinary Germans are less-than-enthusiastic about the specter of higher taxes that are aimed at shoring up the balance sheets of banks and governments in countries that are not Germany. [Greece ETF Stung by Protests]

Merkel’s moves to help ailing Eurozone nations leaves her vulnerable to losing crucial conservative votes. In a sign that Merkel’s bailout policies are out of favor, traditional conservatives in the ruling Christian Democratic Union and its sister Christian Social Union scored a sound victory in last week’s Bavarian state election, reports Karl-Theodor zu Guttenberg for the Financial Times.

Any weakening of Merkel’s ability to keep Germany in the position of being one of the Eurozone’s financial backstops could pressure GREK. The International Monetary Fund recently hinted that Greece will face funding gaps as soon as August 2014, according to Forbes.