Greek Stocks Tumble, Drag Periphery Down, On Election Fears, Retroactive Tax

Tyler Durden's picture

Four years and three prime ministers after Greece’s then premier, George Papandreou, requested an international bailout that slammed his nation with painful austerity (but saved the EU banks), Bloomberg notes that political instability still haunts Greece. Despite issuing bonds and GDP coming in slightly better than expected (still in recession/depression), former Prime Minister Costas Simitis of Pasok admits "The euro crisis seems to be over but its causes have not withered away," and if election polls are anything to go by, the fragile fraud that is a Greek recovery is set for problems Samaras' governing coalition as Syriza (the opposition that rejected the bailout terms) support soars and Pasok plunged to sixth place with just 5.5% support. In addition, retroactive taxes on bond gains are weighing on European bond markets (and Greek stocks).

 

First - there's this - Greece has decided to instigate a retroactive tax on gains made on Greek government debt...

The provisions of the Circular refer to both non-resident individual and non-resident legal entities without a Greek permanent residence/establishment that have realised capital gains from Greek debt (including government and corporate debt which is either listed or unlisted) in the period between 29 February 2012 and 31 December 2013.

 

The tax imposed on such capital gains is 33% for legal entities and 20% for individuals

In other words - if you damn speculators made money on the back of the ECB's promise, fuck you pay me!

Greek Stocks are not happy...

 

and the new 5Y bond issue is tanking...

 

The reaction to this uncertainty is clear in bonds...

 

And, as Bloomberg reports, the political event risk suddenly got serious

While New Democracy trails Syriza, the opposition group that rejected the terms of the bailout packages, the bigger threat to the government may be the collapse in support for Samaras’s coalition partner Pasok. Papandreou’s Pasok, which dominated Greek politics for three decades, plunged to sixth place with just 5.5 percent of the vote in a recent poll as voters blame the party for the country’s economic meltdown.

 

Samaras’s governing coalition has 152 lawmakers in the country’s 300-seat legislature. The prospect of the 27 Pasok lawmakers withdrawing their support could deter the foreign investors helping to fuel the recovery, according to Megan Greene, chief economist at Maverick Intelligence and a columnist with Bloomberg View.

 

If there were snap elections and investors were spooked by the prospect of Syriza being the negotiator for Greece, it could really hurt the Greek recovery because it’s so fragile,” she said in a telephone interview.

 

...

 

The euro crisis seems to be over but its causes have not withered away,” former Prime Minister Costas Simitis of Pasok, the socialist party that dominated Greek politics for three decades, said in a written response to questions. “High unemployment and uncertainty fuel euro-skepticism, while member-states become increasingly reluctant to cede more power to European institutions.”

 

...

 

Syriza wants a clean victory in order to put an end to the catastrophic path of one-sided austerity and great depression,” Dimitris Papadimoulis, a Syriza candidate said in an interview.

 

...

 

“Greece used to have a very stable political landscape,” said John Loulis, an Athens-based political analyst and communications strategist. “But the landscape has shifted dramatically. There is a big chance that we may see surprises the night of the elections.”

 

...

 

“We’re treating these elections as if they were a super opinion poll for national elections,” Lyberaki said in a May 13 telephone interview. “Reducing this to a choice between austerity and Syriza does a disservice to the guy in the street who’s in favor of Europe but has been brought to his knees by taxes.”

Except that is exactly what it is... and it seems investors are starting to comprehend that as IceCap noted last night.