Snap Elections In Greece Fuel Euro, Market Uncertainty

The euro was kept low against the dollar by political uncertainty in Greece after Greek Prime Minister Antonis Samaras failed Monday for a third time to have his candidate for president confirmed by parliament. Samaras said he would call for snap parliamentary elections at the end of January.

While Samaras’ failed presidential confirmation didn't immediately knock down the euro, analysts said it reinforces the euro’s drop over the past six months. Snap elections could bring the left-wing, anti-bailout Syriza party into power in Greece. Syriza wants to negotiate an early end to a bailout passed two years ago to pull Greece out of a spiraling debt crisis.

Only 168 Greek MPs out of 300 total voted to confirm Samaras' candidate, Stavros Dimas, in Samaras' third and final attempt to get him in as head of state. Greece must hold snap elections per the constitution if the prime minister cannot gain the 180 votes in parliament needed to confirm his candidate for the job. Samaras accused Syriza and the alleged neo-Nazi Golden Dawn party for bringing Greeks into an election they don't want.

Syriza leader Alexis Tsipras called it an "historic day," and that "with the will of our people, in a few days the bailout agreements of austerity will be history," according to Telegraph. Syriza has led in opinion polls over the past few months, but that lead has narrowed. Tsipras said on Monday that his party would seek to stay in the eurozone and negotiate an early end the bailout program instead of abandoning it without consultation with involved parties, a slightly less radical line than full abandonment, which he has advocated for in the past.

“The vote was an unfavorable development for the euro as it heightens political uncertainty in Greece,” Lee Hardman, a forex expert at Bank of Tokyo-Mitsubishi said, according to Bloomberg. “It increases the risk of a potential clash between the new government and international creditors going forward.”

The euro was at $1.2200 early Monday after falling to $1.2165 last week, the weakest level since August 2012. It’s still on track to lose more than 11 percent this year, according to Reuters. Activity was scarce on European markets, with the FTSE EuroFirst 300 Index dipping around 10 points total, or 0.75 percent, through the late afternoon on Monday.

John Hardy, head of forex strategy at Saxo Bank A/S in Denmark, said that the Greek vote will likely continue to affect Greek assets, but only significantly affect the euro if it causes “wider risk contagion,” according to Bloomberg.

The European Central Bank will consult with Greek authorities on how to move forward with their review of the Greek bailout, in which it played a leading role. A statement from the bank said it “will not interfere or comment” on the Greek vote, according to Reuters.