Syriza is the party that just won power in Greece.
Often in democratic elections, a party will make claims that are somewhat outlandish … and then back off of them once it wins the election.*
Syriza has only taken a few days to do just the opposite, rattling markets.
Within hours of taking office, government officials said they would stop the planned sale of the state’s majority stake in Greece’s largest port and dominant utility. They also pledged to rehire thousands of public-sector workers and reopen the country’s state broadcaster, which had been shut down by the previous government.
The moves scuttled the expectations of some European officials that Greece’s new leadership would retreat from its radical campaign platform after attaining power. Greek stocks plummeted more than 9%, with the country’s four main banks falling more than 25%. The yield on two-year debt rose by 2.63 percentage points—an enormous move by bond-market standards—to 16.5% as Greek bond prices tumbled.
What they are worried about in the EU is contagion, and a flight to quality. There’s already small signs of that:
Elsewhere in Europe, bond prices in Italy, Spain and Portugal also edged lower, giving up some of their gains since the European Central Bank announced a major bond-buying program last week. Meanwhile, German 10-year government bonds—seen as a haven in times of debt market turbulence—rose, driving the yield to 0.35%, close to a record low.
Read the whole thing, entitled “Greece’s New Leaders Act Swiftly to Reverse Austerity” in the January 28 issue of The Wall Street Journal.
* My name for this comes from a description some pundit made 20 years or so ago about why Bill Clinton was able to combine political and economic success: “he doesn’t believe his own BS”.
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