Business World

Tuesday 24 October 2017

Market relief as Greek confidence vote passes

European concerns over a catastrophic debt default are put on hold -- for now

Demonstrators raise their arms during a protest rally against a new austerity package in front of the parliament in Athens yesterday
Demonstrators raise their arms during a protest rally against a new austerity package in front of the parliament in Athens yesterday

Emmet Oliver and  Donal O'Donovan

There was relief across financial markets last night as the Greek parliament voted confidence in the government, effectively preventing a catastrophic debt default by the debt-laden country.

The vote was won by 155 to 143, highlighting the tension within Greece, which last night was forced to put riot police around its parliament due to disturbances.

Markets are likely to surge this morning as the default concern -- at least for now -- wanes. The vote means that a further instalment of Greece's bailout programme can be given to the country, although an additional vote on a new austerity package will still be needed.

It should also be good news for Ireland which was in danger of getting caught up in a spillover impact from the crisis.

Markets were nervous all day yesterday ahead of the vote, with worries that if the Greek government didn't survive the country would end up not repaying a large portion of its €340bn of debt.

Many still believe that could happen, but with Greek Prime Minister George Papandreou surviving the confidence vote in parliament that possibility lessens for now, although Greece will have to sell many of its largest assets and privatise its state companies.

Mr Papandreou was last night seen embracing his fellow parliamentarians in relief at the vote, when he garnered more than the absolute majority of 151 votes he needed in the 300-member legislature.

Mr Papandreou had called the vote, which passed late last night Irish time, to face down an internal party revolt and help him pass deeply disliked austerity measures that have provoked strikes, protests and a slump in his popularity.

Euro area finance ministers said on Monday they would only disburse rescue loans to Greece if the country demonstrated a commitment to stick to the conditions attached to the loans.

Before the close investors were betting Mr Papandreou would win. The win will move the country closer to securing rescue funds by the first week in July, on time to meet a repayment of debt that falls due in the middle of the month.

Greece sold €1.25bn of government bonds due to be repaid in three months. Finding buyers at any price means Greece found investors prepared to bet that the country will not have defaulted by the end of the summer.

The yield on Greek government debt fell before the vote. The yield on two-year Greek government bonds fell to 27.64pc, having hit more than 30pc last week. Greek 10-year bond yields fell to by more than a third of a percent to 16.97pc.

Irish and Portuguese 10-year bond yields were also lower yesterday. The yield on the Irish bonds fell slightly to 110.4pc, but are not much below the all time high of 11.7pc.

Irish Independent

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