The stock market "sinks" after the new political dead end

The wreck and the new attempt to create a government increases the uncertainty of the Greek economy. Once it became known that we are going to new elections, the euro fell under $1.28, while a downward trajectory was followed by European indexes with Eurostoxx 50 subsiding by 1.16%. The ASE general Index, after recording slight gains, found itself in freefall recording losses of more than 4%, to close with 3.62% losses.

Elections, which as everything indicates will take place on June 17th, signal a new cycle of pressure on the economy, which is now facing the possibility of an “accident”.

Liquidity conditions are deteriorating daily and the market is expected to incur further losses since uncertainty is the reason for deferred payments.

State revenues are severely declining since many postpone their financial obligations “to see what happens”.

The economy on a razor’s edge

At the same time state cash is constantly diminishing since the fiscal situation of the country is literally balancing on a tightrope, with funds only lasting until June. This means that the country will go to elections with empty coffers and if there is further political gridlock, there will not even be any reserves in order to manage the situation until a solution is found.

The great danger is the pressure on the banking system from the outflow of deposits, which tests the strength of banks hard. However, according to information, in the next few days the banks will receive a down payment of the recapitalization of 18 billion euro, and thus banks will receive a liquidity pillow which will allow them to handle pressure. According to information, the outflow noted today and yesterday caused specific concern to banking executives.

Political uncertainty and the economic downturn have placed the Greek economy in a vice. As already announced by ELSTAT, during the first quarter of 2012 the Greek economy noted a reduction of its GDP by 6.2%. This points to the fact that recession is deeper than previously thought of and doubts the BoG and EU predictions that recession will be at 5% and 4.7% respectively.

Returning to markets and especially the ASE, the feature of the day was how the Greek stock market sunk, with the news of the wreck of a government formation.

The plunge of the General Index was such that it went summarily to a new low of 553 units, with the drop reaching 4.9%, before finally closing shortly afterwards at 562.88 points and -3.62%.

The National bank closed at 1.41 euros a share, losing 3.42%. A plunge of 10.60% for Eurobank and 5.85% for Alpha Bank. A crash of the PPC’s share with 7.47%. Pressures on the share of OPAP, down by 3.88%. A dip for Folli-Follie by 2.40%. A fall of 2.65% for Mytilineos. Total transactions reached 43 million.

European stock markets are moving downwards after their morning gains. Pressure was increased due to the dramatic political situation in Athens, which incidentally is being covered minute by minute by the foreign media through breaking news bulletins

The euro continues to drop, not only losing its benchmark of $1.28 but also being pressured to $1.2777.

On the other hand, European funds are looking for an outlet and safe havens, either directly in US stocks and bonds, or indirectly through European companies in London. It is characteristic the the German ten-year yield fell to 1.47% after yesterday’s historic interest rate of 1.45%.