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Tuesday, May 8, 2012

The focus following the European elections over the weekend was on France. But it seems like the bigger elections-related story is Greece, where an unclear mandate is leaving heightening concerns about its recently agreed bailout. The markets appear to be willing to give the new socialist French president the benefit of the doubt, but Greece seems again to be moving to center stage for all the wrong reasons.

A non-partisan and technocratic government in Greece agreed to the terms of a fresh bailout, which was to be implemented by a new government elected through parliamentary elections last weekend. But the election has failed to clear the air by giving a fractured mandate.

With the mainstream parties unable to put together a viable coalition, it is now up to the more extremist parties to try forming the government. These parties were able to increase their standing with the Greek electorate by opposing the new bailout and the associated austerity measures.

Greece is ground zero of the Euro-zone debt crisis, and these political developments appear on track to keep the country on the spot. With a major part of the new parliament opposed to the harsh new austerity measures that the interim technocratic government agreed to as the price of a fresh bailout, the new elections have raised rather answered any questions.

Not only is the status of that bailout in doubt now, but so is the country’s position within the Euro-zone. In a best-case scenario, the country goes back to the polls next month, hoping for a more decisive mandate. Either way, Greece is again in the eye of the storm. 

It is fairly quiet on the home front, with nothing major on the economic calendar. On the earnings front, DirecTV (DTV) missed expectations of subscriber additions, but its top-line was barely below consensus. And we got weaker-than-expected results from Electronic Arts (EA) and Wynn Resorts (WYNN) after the close on Monday.

Sheraz Mian

Director of Research

 
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