Greece In Turmoil After Third Failed Presidential Vote Means January 25 Snap Elections

Tyler Durden's picture

And just like that Grexit is back.

It appears that with a few short days left in the year, the Santa rally is finally over, if only in Greece where both bonds and stock are tumbling after the third vote for PM Samaras' appointed presidential appointee Stavros Dimas concluded as many had expected: in failure, with 168 Greek lawmakers voting in favor of Dimas, well short of the 180-vote threshold needed. 132 voted against Mr. Dimas. This means that the "worst case" scenario - at least as described by Goldman - is now on deck: a snap general election that could bring the anti-bailout Syriza party to power. And speaking of Syriza, and its triumphant leader Samaras, moments ago he announced that the now inevitable Greek elections will take place on January 25: pencil that date in for even more turmoil.

As for Samaras, his coalition government is now expected to resign later today.

The biggest question now is just how far ahead of New Democracy is the anti-bailout Syriza in polls, and will it be able to achieve a sufficient majority without needing ND or other coalition parties in order to rule, but with a 6%+ lead, Syriza's chances look good to quite good:

Considering the rather violent market reaction in Greece right now, where everything is selling off, many have decided not to wait tunil then.

In terms of next steps, this is what happens via Bloomgberg: 

  • Samaras is expected to chair a cabinet meeting after the vote
  • Parliament will be dissolved, incumbent President Karolos Papoulias may call new elections today, though he has up to 10 days to do so; actual date of vote is announced through a presidential decree posted on parliament’s main entrance.
  • Elections must be held within minimum 21 days and maximum 30 days after they’re announced
  • Jan. 25: By convention, parliamentary elections are held on Sundays, meaning this could be the first realistic date for the vote; Feb. 1 is also a possibility
  • Thereafter: If the party that places first has majority, its leader gets a mandate to form a cabinet which is sworn in on the third day after elections; if there’s no clear majority, the president hands mandate to leader of party with most votes to form a government within three days and put it to parliament for approval; failure to form a workable coalition means mandate passes to second-placed party and then third-placed, each of which has three days; if, as happened in 2012, each party fails to form a government, parties meet with president to try and form a coalition; if that fails, new elections are held
  • Feb. 28: Greece’s two-month bailout extension expires, potentially leaving the country without a financial lifeline or access to bond markets

The market reaction upon learning the news:

  • Greek stock market tumbles, leading declines in European stocks while generic Greek govt bond spreads vs Germany widen after Greece’s PM Samaras fails to install president in final round of voting and now faces snap elections early next year.
  • Greek/German 10Y spread +70bps to 861bps vs day low of 757bps; curve extends inversion
  • Greek 10 Year yield exceeds 9.5% for the first time since September 2013
  • German 10-Year yield falls to record 0.563%
  • Stoxx 600 falls as much as 0.8% to session low; Greek banks are the biggest decliners, with Eurobank Ergasias -23%, Piraeus Bank -21%, National Bank of Greece down  18%, Alpha Bank 17% lower
  • European shares fall, though are off intraday lows, with the telcos and banks sectors underperforming and basic resources, health care outperforming.
  • The Italian and Spanish markets are the worst-performing larger bourses.

Finally, for those who missed it, here is Goldman's warning of fire and brimstone should the Greek indeed decide the time to exit the Eurozone has come:

Goldman Warns Greeks Of "Cyprus-Style Prolonged Bank Holiday" If They "Vote Wrong"

Funny what a difference two months make. Back on October 4, we wrote "Here We Go Again: Greece Will Be In Default Within 15 Months, S&P Warns" and... nobody cared as the Greek stock market meltup continued. Now, after the biggest three-day rout in Greek stock market history (or about 30% lower), and with the overhyped, oversold, oversusbcribed recent Greek 5 Year bond issue available in the open market some 16 points lower, and suddenly everyone cares. Including Goldman Sachs.

Overnight the bank with the $58 trillion in derivative exposure issued a note "From GRecovery to GRelapse" which is quite absent on the usual optimism, cheerfulness and happy-ending we have grown to expect from the bank whose former employee is in charge of the European printing press. Here is the punchline: "In the event of a severe Greek government clash with international lenders, interruption of liquidity provision to Greek banks by the ECB could potentially even lead to a Cyprus-style prolonged “bank holiday”. And market fears for potential Euro-exit risks could rise at that point."

Dear Greeks, "don't vote wrong" as EU's Juncker urges you - you have been warned.

Here is the full note.

Why Have Greek Assets Tumbled?

Over the last three months, Greek assets have come under intense selling pressure. The 10y Greek government bond trades at a yield of 9.1% compared to 5.5% in September and the Athens stock exchange is trading 32% lower over the same time-frame (and 40% below the post-crisis peak). As we have written extensively, this deterioration in market conditions has taken place despite an ongoing improvement in macroeconomic indicators. Markets have sold off on the back of election uncertainty ahead of a key year for Greece’s recovery process.

Greece needs official sector funding to pass the 2015 funding hump and ensure financial stability.

Indeed 2015 is a pivotal year for Greece. The most recent growth data prints suggest that the recovery may be gaining momentum. But financial risks still lurk, which could destabilize the Greek economy back into recession. More specifically, 2015 is the last year the government faces large financing needs, nearing €24bn (net of the established primary surplus). Part of those needs may be covered with domestic resources (see Box 1). However, additional funds will likely be required to ensure the government is able to meet its liabilities. As discussed in Box 1, the additional funds required may range between €6bn and €15bn depending on different economic assumptions.

It is important to note that from 2016 onwards, overall financing needs become a lot more manageable (compared to €24bn in 2015) - at or below €10bn until 2022 (lower primary surpluses or higher bond yields than the ones provisioned in the program could push these calculations up somewhat).

With government bond yields at prohibitively high levels, the Greek government will require official sector financing to provide the additional funds for 2015. €7.1bn of IMF funds are currently available as part of the Greek assistance program under relevant conditionality. In addition, the Eurogroup decided on Monday to grant Greece a precautionary credit line (ECCL) provided Greece completes the ongoing review by end of February. There are three main items to be agreed on for the current review to reach a conclusion: a) further reform in labor markets and in union legislation, b) further pension system reform, and c) further budget cuts. Greece is also likely stay under close economic supervision thereafter.

Political complications arise with the presidential vote.

According to the Greek constitution, the parliament needs to elect a President of the Hellenic Republic every five years. The presidential vote requires an extended majority. The term of the incumbent, President Karolos Papoulias, ends in early March 2015. The parliament would need to start the process of electing a new president at least one month in advance – by early February the latest. Should the parliament fail to elect a president, general elections would need to be held.

Due to a tight timeframe between the new deadline for completion of the program review and the deadline for the presidential election, the government decided to speed up the voting process. Three votes will take place – first two on the 17th and the 23rd of December respectively. The first two votes require a majority of 200 votes, which is unlikely to be achieved given the current parliamentary balances. The one that essentially matters is the third and final one on the 29th of December, where the Greek government would need to find 180 votes in the current parliament (of 300 members) to back their presidential candidate. As things stand, the government majority does not suffice to elect a president and avoid elections. 25 independent MPs and MPs from small parties would need to consent to meet the tally.

In the event that the parliament elects a president, the government and the troika will likely resume negotiations and an agreement is likely to be found. Financial risks would decline and Greek assets would likely rally.

In the event that the parliament fails to elect a president, general elections would be held and market uncertainty/pressures would extend. At this stage it is important to understand that market pressures are not linked to the democratic process of elections nor to a potential government change, whatever the ensuing government formation may be. They are linked to the risk of policy discontinuity and a severe clash between Greece and international lenders. More specifically, we think the room for Greece to meaningfully backtrack from the reforms that have already been implemented is very limited. Any such attempt would lead to an interruption of official financing to Greece.

Examining the downside scenario.

To be sure, even in the event of a government change, there is room for a cooperative solution between Greece and Europe. Greece has made significant reform progress between 2012 and the gap between what has already been implemented and what remains to be done is not insurmountable.

Also, the incentives for a clash are not there. For instance any Greek government would likely want to capitalize on the momentum that the economy is building on the activity front, rather than trigger a disruptive capital flight that would lead Greece to a double–dip recession. In addition, given that more than 80% of Greek debt is held by the official sector and given that any OSI would be feasible only as part of an agreement with the Euro-area, there is an incentive for a Greek government to pursue cooperative solutions.

However, the history of the Euro-area crisis has shown that the probability of an “accident” can never be dismissed, when it comes to intra-EMU politics. And it is important for markets to be able to understand and quantify the aspects of a potential downside scenario, where official financing to Greece is interrupted.
The Biggest Risk is an Interruption of the Funding of Greek Banks by The ECB.

Pressing as the government refinancing schedule may look on the surface, it is unlikely to become a real issue as long as the ECB stands behind the Greek banking system. In fact, refinancing became a lot more pressing between 2011 and 2012. But financing needs were met despite the impasse in negotiations between Greece and international lenders – partly via the issuance of T-bills repoable at the ECB by Greek banks. Such methods can always be revisited at times of extreme need.

But herein lies the main risk for Greece. The economy needs the only lender of last resort to the banking system to maintain ample provision of liquidity. And this is not just because banks may require resources to help reduce future refinancing risks for the sovereign. But also because banks are already reliant on government issued or government guaranteed securities to maintain the current levels of liquidity constant.

And this risk can become more pressing from a timing perspective. At the heat of the Greek crisis, there was evident deposit and broader capital flight, which Greek banks helped accommodate with ECB’s help via the ELA facility. In the event of a severe Greek government clash with international lenders, interruption of liquidity provision to Greek banks by the ECB could potentially even lead to a Cyprus-style prolonged “bank holiday”. And market fears for potential Euro-exit risks could rise at that point.

Will European assets be affected?

Outside the spectrum of Greek assets, the main question becomes whether Euro-area assets (such as peripheral bonds, the EUR etc) as well as global assets (equities) are likely to be affected by the Greek crisis. We think this is unlikely. Should financial pressures from a Greece related shock hit the peripheral countries formerly in a program (Ireland & Portugal), there may be special arrangements to avert the transmission of the shock locally. Moreover, in our view, the ECB is likely to engage in outright market purchases of sovereign debt securities as part of their monetary policy operations in H12015. We do not think that the volatility from Greece is likely to derail the QE decision.

There is of course the risk of broader contagion, should the participation of Greece in EMU once again be put in doubt. But we think this is a low probability event as the majority of the Greek population is still in favor of EMU participation and as all major political parties in Greece currently deem Euro-exit as undesirable.

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Bearwagon's picture

Yeah! Molon labe! It's getting serious quite fast, Juncker, how about a fat, blunt lie, now?!

Latina Lover's picture

Molon Labe, indeed. Only this time   it is not the Persians who are threatening them, but an even more evil empire.


Should  the Greeks would reclaim their dignity by ejecting the EU/Banksters, repudiating their debt and rebuilding, they have a chance to create a better society. Otherwise they are doomed to endless years of mediocrity and debt slavery.

Aaaarghh's picture

Please, for the love of sanity, please let the greek people vote syriza. Let them show that an economic short sharp shock is better than a long drawn out death by brussels. Death to the EU, Death to the banksters!

Haus-Targaryen's picture


I am surprised.  But Wooohoooo""

Burn you fucking bitch.  Burn this whole thing down!  

Aaaarghh's picture

i wonder who would be next? Aren't italy considering a return to the lira?

Haus-Targaryen's picture

Cute Vlad dumping any Italian and Spanish notes, naked shorting the Greek banks like a motherfucker and invading Ukraine.  

Enjoy your cake you fucking Brussels morons.   

GetZeeGold's picture



Gonna need a new can to kick.

_ConanTheLibertarian_'s picture

The old can is so dented, it hurts when kicking it.

wallstreetaposteriori's picture

I'm sure Syriza is going to win, they have been building momentum over the past few years.  The only problem is, the entire organization is run by kids.  Their chief ecomomists have no idea what to do as per fixing the hellenic economy.  A few years ago they told me that they wanted to give everyone government jobs and double the wage... I responded with "isn't that how your country got into this mess in the first place"?  Their response, "...."

Ghordius's picture

win or not win, kids or not kids, either they win 51% of the votes or they can only govern in a coalition

if you take the projected numbers shown in the article, it would have to be with ND. possible, but hardly so

nope, in those typical european multi-party electoral setups, it's completely possible to be the party number one... and still be in the opposition, in parliament. and watching number two, three, four, five and six forming a government with 51% of the elected MPs

personally, I prefer this kind of arrangement, and dislike the "winner takes all" setups. but that's me, of course

Farqued Up's picture

Ghordius, I agree, I've enjoyed all of this two party tag team cluster lovefest that I can stand.

angel_of_joy's picture

You can spin it any way you want, but you KNOW that the entire EU "dream" is FUBAR when you have a party like Golden Dawn polling TWICE as high as PASOK (6.5% vs 3.3%). GD are a bunch of goons with a penchant for good old uncle Adolf, while PASOK (Greek Socialist Party) is practically the creator of modern Greece. Oh well, here goes the neighborhood...

Next game of EU political football to watch: see Marie Le Pen winning presidency in France, against the little NWO stooge (Sarko 2, like in a bad horror series), 2 years from now. That would be about same time as the Britons finally figuring it out if they want IN or OUT of the EU contraption... In the mean time, the so-called EU "economy" will continue to suck, to everybody's great enthusiasm.

The Limerick King's picture



So Greece has become a concern

The EU could easily burn

If Syriza wins

The fire begins

The play if they do? an urn!

Max Steel's picture

Greeks ( in Nuland's voice : : FUCK THE EU .

winchester's picture
winchester (not verified) Aaaarghh Dec 29, 2014 6:52 AM

not gonna happen, never, same for greece exit, they will pay.


i remember you all the system has not been designed  so they can exit, whatever the problem. they will wipe the targeted country, but they will never let it to shake the UE stability.



Ghordius's picture

rubbish. the very moment Greece would exit the eurozone, plenty of megabanks would peddle some dollar loans to it. like someone exiting a methadone program finding plenty of heroin pushers at the door

nobody here asks why even Syriza is not for a GreXit a priori. the simplification and projection going on here is simply epic

trader1's picture



most of the commenters here are hopelessly "belief-formed".  they are going to continue reacting to new developments with how their belief system processes the information.  they are still operating under thousands of years of layered myths and superstitions, happy to reject and remain ignorant to systems of belief contrary to their own, and unable to do science or philosophy beyond a kindergarten level.


trader1's picture

because when you can't challenge the truth,

junk and run...just junk and run ;-)

winchester's picture
winchester (not verified) trader1 Dec 29, 2014 8:08 AM

ok man, rendez vous in MARCH, or any time you want, greece will NEVER LEAVE euro zone, do you ear me ? NEVER.


i, wincherster, reader of ZH, certify on my honnor, having a bet with TRADER1, saying GREECE, , will not leave the euro zone, not a single country will go outside.




i can't wait  march to post you " you were delusional revolutionar coward saying  "go my firend" but stay behind to not be hurt, i say NOBODY will move to loose what they got, it is SYSTEMIC, it is GLOBAL, every one got more to loose to change the system that  earning by changing it.


someone wrote it here, you say all  bad behavior this or that, but every one make money making same bets and act same, financially speaking....


clean your front door before talking to me dude, i'm not playing this game, i'm just watcher here. system can collapse i  have nothing to loose :) i just watch the sheeps and the sheperds dancing on the lands.


Dame Ednas Possum's picture

Saying "NEVER" is for loosers.

trader1's picture

i don't think greece will leave the EZ either.

i just think they'll end up re-negotiating the terms of the bailout package.


Tall Tom's picture

I generally will not waste my time with arrogance as yours.


First you insult this group. Then you get junked and wonder why? That is demonstrative of YOUR STUPIDITY.


So go and autofellate spineless man.



Dame Ednas Possum's picture


Trader1 - what a nob-jockey.

trader1's picture

as opposed to your own and the ZH hivemind arrogance?  

to varying degrees, we're all arrogant and trying to project a reality onto the world that we observe.

this is fight club, right?

take what i say as an insult.  fine.  

someone else will take it as a learning moment.


Aaaarghh's picture

we can hope though can't we.

Thats not the way syriza was talking last year, they were openly talking exit. I think they have calmed down the rhetoric to come across more moderate and thus more electable, but I still think the original tsipras and syriza are lurking :P

If they take loans from said banks after all they have been through, they deserve to suffer. Best to just default. my opinion anyway.

shovelhead's picture


I think that falls under the "why buy the cow when you get the milk for free" clause.

new game's picture

this rings clear with the tyme that the swiss will back their frank with gold.

ha, greece is a bitch that needs to spread her legs and submit again...

ItalianColonyCitizen's picture

My country does not have any independence, cannot choose money or anything, it' a colony of the USSA. It was invaded and now hosts 132 american bases. Prime ministers are appointed by the US ambassador.

Prime minister Aldo Moro, an american servant like those before him, dared issuing the famous 500 lire bill, one that WASN'T granted by the Banca d'Italia central bank but directly from the people. He was kidnapped by NATO agents and murdered in the 70's.

Funny, eh? We are a colony of a colony! 



Greenskeeper_Carl's picture

I understand the sentiment about showing that a short , sharp shock is better than this long drawn out depression. However, the bankers in the rest of the EU will ensure they are punished for repudiating their bogus debt. So many banks would lose a shitload of money and the Greek people will be made to pay for this one way or another. I'm not saying you are wrong about the smarter course of action, but I don't think they will be allowed to access capital markets anytime in the near future.

Peter Pan's picture

The minute Greece attempts to eject/evict the banksters, the powers to be will wink at Turkey that it will not interfere if it accidentally happens to create an episode or two in the Aegean.

Ghordius's picture

"Should  the Greeks would reclaim their dignity by ejecting the EU/Banksters, repudiating their debt and rebuilding, they have a chance to create a better society"

simply too much wrong in one sentence

first, the banksters that put Greece into troubles were... those of the Vampire Squid Firmly Attached To The Face Of Humanity (oh, and Greek banks writing CDSs)

second, the main debt Greece currently has is not to banks, it's the fresh one from a few select european countries. the EU as very little to do about it. You could say that all in all Germany, Finland et al bailed out Greece from the banksters

third, repudiating their national, sovereign debt is... an interesting notion. wouldn't it be better to wait until the Greek budget is balanced? just asking, then if it's not balanced... who is going to lend to Greece after a debt repudiation? Again, just asking (and remembering Argentina, and the path to dollarization)

fourth, dignity is imho the wrong word. pride would fit better to Greece. but a better Greek society would probably anyway involve less pride and less corruption

fifth, there is no serious discussion here about Greek sovereign debt. Otherwise there would be some mention about how big the quota of debt service is on the Greek national budget

HenryHall's picture

Ghordius > who is going to lend to Greece after a debt repudiation?

China.  - Greece starts using the Yuan. Like Ecuador uses the USD.

Ghordius's picture

you think China is already that far? possible. I was thinking more about sweet, sweet dollars by a consortium of megabanks. four of them, specifically

BurningFuld's picture

Greece balancing it's budget? Are you a stand up comedian?

Ghordius's picture

If I could choose, I'd opt to be seen in the same category as Aristophanes, who wrote several excellent political comedies

Greece is doing heroic efforts in it's budget, and for all purposes it is balancing it's budget. That's not comedy, that's facts

the whole discussion here ought to be about that, and about how long. me, I'd be all for forever, as for all other european sovereigns

that all european sovereign budgets are converging towards balanced is one of the things that aren't discussed here on ZH

but again, that's as for the magically shrinking ECB balance sheet

edotabin's picture

They have managed, through amazingly harsh and extreme methods, to reach a near primary budget surplus. If one adds interest payments, Greece's deficits are still on the rise and will continue to rise. I do not know what hanky-panky is going on behind the scenes. So backroom deals aside, Greece was bankrupt, is bankrupt and can never, ever pay back the debt without some earth-shattering shift,occurance or discovery.

As fo the reasons the country is in this position, it is a combination of evil policies over the past 35 years, conspiracy and a heavy dose of delusion and ignorance of the Greek people. They were led to the slaughterhouse all while thinking they were the center of the universe. 

This is the best I could do for a factual summary at this hour. Believe what you will.

GoldSilverBitcoinBug's picture

And you think China will trust a commie party like Syriza ? If they can repudiate EU debt they can also repudiate China debt, no ?

After repudiation nobody will lend to Greeks, the Greeks are dead, both with the EU or not; simple as that.

Hedge accordingly.

Aaaarghh's picture

plenty of countries have defaulted and continue to be loaned money, uk is in mind atm, ffs, even russia. default is not the end of the world.

JohninMK's picture

Yes, but the UK last defaulted in 1932 according to Wiki, so not really relevany now.

GoldSilverBitcoinBug's picture

No, it will be just the end of your savings when banks will start to Bail-In her losses.

Again, hedge accordingly.

taraxias's picture

First, you haven't a clue of what you are talking about

Second, although the majority of Greek debt is now held by the official sector (ECB, IMF, EU members central banks), any hair cut as proposed by Syriza will have cascading effects into.........drum roll please......the private banking sector.

Third, Greece has been in a primary surplus position for many months now. Internal social spending which has been savagely cut can be managed. It's debt service that's dragging them down.

Fourth, there are far more corrupt places in Europe than Greece or did you miss the juncker conceived and executed Lux tax evasion scandal

Fifth, there is no PUBLIC serious discussion because they don't want to lend credibility to the Syriza demands. I am sure the secret back room discussions they haven't told you about already have a Plan B in place when Syriza gets in and European bond and equities markets start to puke blood. There will be a haircut or Europe breaks up, which do you think they will pick?

Sixth, you always post stuff on here with a know it all attitude. Often you don't know shit.

Ghordius's picture

taraxias, the "cascading on private banking sector"... which one? yes, Greece has been in a primary surplus position for many months, now. don't you see that the very market operators that are construing a new "Greek Debt Crisis" don't care anymore about fundamentals?

there is a difference between endemic corruption (bottom up) and top-down corruption. Greece still suffers too much from the first sort, and his is evident in tax collection. the Lux tax evasion is not something that hurts the Lux nation directly, does it?

stop getting blinded by my arrogance, real or perceived, and you'll note that our points have a lot in common. or perhaps tone down your Greek pride, real or perceived, to the same effect. I do business in Greece, btw

taraxias's picture

Tired of trying to deconstruct the ignorance you have put up this morning, albeit expressed in your usual eloquent language to almost make it believable, so I will stop here.

Besides, I always stop debating the minute someone contradicts themselves or back pedals on their original argument. You have on the position you took on Greece's primary surplus situation.

I will leave you with this to ponder. Greece will either be given debt relief (not just extending maturities or lower interest but real debt write off) or Europe splits sooner than expected (splitting is already baked into the cake the minute the euro was introduced, it was all just a matter of when). What do you think your bureaucrats will do?

Ghordius's picture

taraxias, you simply fill in too much between my lines. with stuff I never said and never meant. Greece has a primary surplus because the european partners are asking for such measures, remember? this besides all the treaties on this matter that were signed by the gov and ratified by the Greek parliament

of course a debt relief is in the cards, eventually. the question is when. "after a few months" is a tad too little/early, considering history. and this has little to do with the euro

just tell me if you think that a balanced budget is simply impossible, for a sovereign, long term, and go on from there

edotabin's picture

You have Greeks who are going to vote for Syriza because "Tsipras did not sign or agree to the austerity measures." They somehow think that because he didn't sign that the terms will no longer apply. You're sitting here and applying your high-flying theories to this thought process?

EDIT: While I'm pretty sure taraxias doesn't agree with my harsh take on the ignorance and sneaky, self-serving character of the majority of the Greek populace, I am in agreement with his overall assessment.

Ghordius's picture

"there is no PUBLIC serious discussion because they don't want to lend credibility to the Syriza demands" please elaborate on that

because the Greek political class does not want to discuss it or because there is no popular support for such things? specifically, which part of the Syriza demands, and those in the past or those in the present?

scrappy's picture

Repudiate the debt is what we all should do. It is math - it is unpayable.

Keep the tits LL.