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Another Greek election is the last thing the market needs

Greece may be off most market participants’ radars for the moment. But with another election in the country looking increasingly likely, an already busy period for political risk could be about to grow worse.

Several eurozone elections were already on the horizon for 2015, well before Greek prime minister Alexis Tsipras had to deal with mutiny in the ranks of his Syriza party as several of his MPs refused to back the austerity conditions he had to stomach to ensure talks on a third bail-out for his country could begin.

It seems incredibly unlikely that Tsipras will be able to go on without firming up his democratic mandate with another election. Opinion polls suggest Syriza would still be the largest party in the Greek parliament after that election, but any firebrand comments on the campaign trail hinting that some of his previous agreements with the country’s creditors could be reneged on would easily reignite fears of an imminent Greek exit from the eurozone.

Many bankers in the SSA market believe that the eurozone has sufficient firewalls — such as the European Central Bank’s outright monetary transactions scheme — in place to deal with a Greek exit.

But perhaps the greater causes for concern should be in other polities.

While Podemos — often referred to as the Spanish cousin of Syriza — is not riding nearly as high in the polls in Spain as Syriza has in Greece, there is room for it to be a destabilising factor in a scheduled general election in the country later this year.

That could be especially true if Greece is being seen to be given any kind of debt relief — something the International Monetary Fund and many others have called for. For instance, while there is no election in Ireland this year, polls have shown that the Irish citizenry overwhelmingly would want its government to seek a better repayment deal on its bail-out debt if Greece was seen to be getting the same.

Portugal, another beneficiary of bail-out cash, also has a general election this year, although there is little sign of populist parties making ground.

But it may be on the local level in Spain that investors should be concerned. A parliamentary election scheduled in Catalonia on September 27 has been described by the region’s president, Artur Mas as an alternative vote on independence for Catalonia.

The pro-independence Together for Yes coalition is ahead in the polls — potentially providing nervy moments for Spain’s leaders in Madrid.

Political volatility was blamed by several SSA market participants GlobalCapital spoke with at the start of 2015 as one of the factors that could cause problems for issuance this year.

It may be that not only were they right to be worried, but, thanks to the probable extra Greek election, the deal windows in the second half of the year could be about to become even fewer in number.

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