ATHENS, ATTICA, GREECE - 2014/11/27: Alexis Tsipras, the leader of SYRIZA (Coalition of the Radical Left) and current leader of the Greek Opposition, enjoys himself during the protest. Tens of thousands Greeks followed the call by Greek Trade Union for a one day general strike and protest march to the Greek parliament. They protested against the austerity measures by the Greek government. (Photo by Michael Debets/Pacific Press/LightRocket via Getty Images)
Alexis Tsipras, the leader of Syriza, during a protest © Michael Debets/Getty

Investors are increasingly worried about the outcome of Greece’s forthcoming presidential election, which could enable radical leftwing party Syriza to take power in March.

Senior Syriza politicians visited London two weeks ago to present their economic programme to a number of large fund houses and banks, but the meetings have sparked anxiety among investors.

A leaked memo from Joerg Sponer, an analyst at Capital Group, the ninth-largest fund house globally, with $1.4tn of assets, described the programme as “worse than communism” and “total chaos”. “Everybody coming out of the meeting wants to sell everything in Greece,” he said.

Syriza denied that Mr Sponer was at any of the meetings it held, but acknowledged other Capital Group analysts were present. Capital Group said the memo did not represent its universal house view.

Since the Syriza meetings took place, a flurry of Greek bankers and brokers have travelled to London to try and reassure clients. The Syriza road-trip “has made some investors quite nervous”, one of the bankers said.

A salesman at Bank of America Merrill Lynch, which hosted a client event with George Stathakis, Greece’s shadow minister for development and Syriza’s economic affairs spokesman, sent a memo to clients after the meeting entitled “Greek Tragedy”.

The memo summarised the party’s economic programme, which includes ending privatisation, renegotiating Greece’s debt with the troika of the European Central Bank, International Monetary Fund and European Commission, and increasing the minimum wage and state pension to pre-crisis levels.

“The notes are quite clear and worrisome for Greece and the [eurozone] going forward. Expect much higher volatility in the months ahead,” the memo read.

Eleni Papoula, an analyst at Berenberg, added: “The economic policies of the opposition party did not seem credible.”

Syriza’s Mr Stathakis said of his London visit: “Syriza’s [economic] positions now have an international audience that understands it is essential to have a complete solution that will make the debt sustainable so that the Greek economy can recover in conditions of social cohesion. Our programme is about social cohesion, development [and] long-term investment.”

If Greece’s fragile governing coalition fails to attract the support of 25 opposition MPs to elect a new president in February, it will face a snap election in March. Opinion polls currently suggest that Syriza would win such an election.

John Paulson, the hedge fund manager who has taken a number of punchy bets on Greek banks in the past two years, told conference participants in New York last week that he will not make further investments in Greece until the political situation stabilises.

He said: “We are prepared to invest more in Greece, but we need political certainty. Our investment plans are currently on hold pending the outcome of the presidential elections. As soon as stability is achieved, we will step up our investments.”

BofA declined to comment on the leaked memo, but Thanos Vamvakidis, head of European foreign exchange at the bank, said: “[Syriza’s economic] programme is well known inside Greece but many foreign investors were not aware of the details.

“A number of investors expressed concerns because they [think] the troika [will] not agree with key aspects of the programme, [and] Syriza said they would not compromise.”

He added that bringing the minimum wage and pensions back to pre-crisis levels “will deteriorate the competitiveness of the Greek economy. They cannot afford to do that”.

Borrowing costs for Greek 10-year government debt have risen to 7.2 per cent, after hitting a low of 5.5 per cent in August, while its debt-to-gross domestic product ratio sits at 174 per cent.

Alberto Gallo, strategist at Royal Bank of Scotland, said his team switched to an underweight position on Greek debt in October in response to the political uncertainty.

He said: “Elections next February could be a catalyst for another round of volatility in bonds, and we have little clarity on any debt-relief decisions, which should have been discussed months ago. The Greek economy is very levered, and despite recent plans to implement debt relief for firms, deflation remains a risk. Syriza’s agenda is [also] unclear on many points.”

Yannick Naud, portfolio manager at UK fund house Sturgeon Capital, which sold all its Greek government bonds in October in favour of corporate debt, added: “If Syriza comes into power with a full majority in the parliament, and it is a big if, it will be negative for government bonds. It will be very difficult for international investors to have significant positions in Greece.”

Additional reporting by Stephen Foley

Copyright The Financial Times Limited 2024. All rights reserved.
Reuse this content (opens in new window) CommentsJump to comments section

Follow the topics in this article

Comments