Greek stocks rebound on pro-bailout party’s poll gain

Associated Press

ATHENS, Greece

Greek stock markets rebounded strongly Monday from a 22-year low on hopes a pro-bailout party will win crucial national elections next month, which would avoid a catastrophic rift with international creditors and keep the struggling country within the euro currency union.

The main stock index in Athens soared to close up 6.9 percent, with the battered bank sector chalking up solid gains.

Four polls published Sunday reversed previous trends to indicate that conservative New Democracy could come first in the June 17 vote, slightly ahead of the anti-austerity radical left Syriza party. Although the conservatives would still fall short of a governing majority, the surveys suggested they could form a coalition government with socialist PASOK, which also have pledged to stick to Greece’s austerity commitments.

Banks also received a boost Monday: The country’s four largest lenders received promised support of 18 billion euros ($22.62 billion) to compensate for losses suffered in a massive debt-restructuring deal earlier this year. The announcement was made by Greece’s Financial Stability Fund after the Athens bourse closed.

Debt-crippled Greece is being kept afloat by huge international rescue loans, granted on condition of harsh cutbacks and reforms that slashed living standards.

The austerity, however, also caused huge popular resentment toward New Democracy and PASOK, the two parties that accepted the terms. Voters expressed that anger clearly in May 6 elections, giving a boost to anti-bailout parties. But the election proved inconclusive, with none of the parties able to form a coalition government, leaving Greece to have another ballot next month.

Greece’s bailout creditors — the other countries in the 17-nation eurozone and the International Monetary Fund — insist that if the country reneges on its austerity commitments, the rescue loans will stop.

That would unleash chaos. The government would be unable to pay hospital workers, police and teachers, pensions would dry up, and a potential panic run on bank deposits would destroy the tottering financial system. Eventually, the country could be forced to abandon the eurozone, reverting to a vastly devalued form of its old drachma currency.

Fears of such an outcome have battered Greek financial markets for weeks, pushing the Athens General Index to close at a 22-year low of 485.18 points Friday. The latest polls, however, helped it claw back some of those losses, rising to 518.49 points.

“This is clearly due to the polls,” said Sergios Melahrinos, analyst at Solidus Securities.