Despite gains in the broader European markets, Greece stocks and country-specific exchange traded fund is experiencing heightened volatility as the specter of snap elections could put the country’s euro-membership status at risk.
The Global X FTSE Greece 20 ETF (NYSEArca: GREK) was down 1.3% Thursday. GREK has declined 28.5% year-to-date. Meanwhile, the Vanguard FTSE Europe ETF (NYSEArca: VGK), the largest U.S.-listed Europe ETF, was up 0.7% Thursday and is down 6.2% year-to-date.
Minister of Administrative Reform Kyriakos Mitsotakis warns that Prime Minister Antonis Samaras has until February to gather a supermajority in the national parliament to elect a new president or the anti-bailout opposition party Syriza could force a snap election, Bloomberg reports.
If Syriza gains enough support, the country will once again debate the merits of staying with the European Monetary Union. So far, Greece has stuck with economic reforms and accepted the stringent terms, or austerity measures, linked to a line of credit. However, Mitsotakis believes that 40% of executives in Syriza “wouldn’t mind Greece leaving the euro.” [Bailout Fears Weigh on Greece ETF]
“The reality is that there will be a climate of uncertainty until February,” Mitsotakis said in the article. “Volatility is caused by the fear of snap elections and the possibility that these will be won by a party which is not normal.”
Meanwhile, Greek government bonds are plummeting, with yields on the country’s 10-year benchmark notes up to around 8.12%. While Greek bond rates have increased, it is still off from the 2014 high of 9.33% on January 17. The higher yields put pressure on the government’s ability to finance itself, potentially fueling anther round of financial crisis woes.