Greek Stocks and Bonds Rally After Mitsotakis Election Win

Greek stocks and government bonds rallied on Monday after the conservative government of PM Kyriakos Mitsotakis secured a stunning victory in the elections.

The Athens Stock Exchange General Index rose as much as 7.3% in trading on Monday, extending its 2023 gains by more than 30%.

At 11:50 am local time, the Index stood at 1,213 points. The last time the market was at the 1,200 level was in the session of July 28, 2014.

Greece’s 10-year government bond yield fell about 9 basis points to 3.933%. The rate is down more than 100 basis points since last year’s high, taking down the spread to Italy bonds — a widely followed risk premium — to minus 30 basis points.

Bloomberg says that the election has been regarded by analysts and investors as the last obstacle standing in the nation’s path toward regaining the investment-grade rating lost 13 years ago, and a Mitsotakis win was seen as the most market-friendly outcome.

In 2022, Greece’s debt-to-GDP fell faster than any other European country, it notes.

In April, American credit rating agency S&P Global Ratings upgraded Greece’s sovereign credit rating outlook to positive.

S&P affirmed Greece’s rating at “BB+”, that is one notch below investment grade. However its outlook shift to “Positive” shows that Greece is likely to emerge from “junk” status in the course of the year, for the first time in more than 13 years.

S&P said its decision was based on Greece’s recent progress in structural reforms, a surge in investment and its rapidly improving fiscal position, which have made the country one of Europe’s fastest-growing economies.

Data published by Eurostat, the EU’s statistics agency also in April showed that Greece last year returned to a primary budget surplus of 0.1 percent of gross domestic product, which excludes the cost of interest payments, after two years of deficits.

Greek stocks rise expecting “necessary reforms”

Mitsotakis’ New Democracy (ND) party won by more than 20 percentage points against the main opposition SYRIZA.

However, due to the electoral system of proportional representation, he has not garnered a lead wide enough to avoid a new vote.

Mitsotakis called Sunday’s election results “a political earthquake,” and promised to work harder on reforms that will bring Greece on par with European standards.

In a statement after New Democracy was shown to have won 58 of 59 electoral districts in Greece, Mitsotakis said that the country needs a strong government that can implement the necessary reforms.

“New Democracy has the approval to govern independently and strongly,” he said, “which is what voters requested in an emphatic and absolute manner. They asked us to progress faster.”