Greek election gives hope to euro but doesn’t promise stability
BY DAVID ROEDER Business Reporter June 17, 2012 6:56PM
Updated: July 19, 2012 6:22AM
Voters in Greece gave investors in the United States the results they were hoping for Sunday, although European financial trouble will continue to weigh on the markets.
Analysts said the outcome of the Greek election vindicated investor confidence that the nation will try to stay within the euro. Separating from the common currency, in the view of some economists, could have led to defaults by Greece and perhaps others nations with weak economies and stun credit markets worldwide.
The election elevated the conservative and pro-euro New Democratic party to the head of a center-left coalition in line for enough seats to form a coalition. With most of the vote counted Sunday night, official results showed New Democracy would win 30 percent of the vote and 130 of the 300 seats in Parliament. The radically anti-bailout Syriza had 27 percent and 71 seats.
“It appears they are all on the same page of staying in the euro zone,” said Diane Swonk, chief economist at Chicago’s Mesirow Financial. “What’s not clear is how coordinated the opposition is going to be.”
Stocks in the U.S. lately have shown bouyancy, with a rally in the Dow Jones industrial average last week of 1.7 percent, in part on expectations that anti-euro parties would not fare well in the vote.
The markets also drew comfort from indications that central banks in the U.S. and Europe stand ready to pour money into unsteady economies if they see the need. The Federal Reserve’s policymaking Open Market Committee meets Tuesday and Wednesday and many expect it will extend a program to hold down long-term interest rates to nudge growth.
Jack Ablin, chief investment officer of Harris Private Bank, said the Greek returns “relieve some of the pressure but it certainly doesn’t solve the problem.” He said he regards the European situation as “in the rhetoric stage,” with national leaders having to sit down and iron out disputes over bailout terms and required austerity.
The problem has defied solution for months. Greece voted Sunday only because an election it held just six weeks ago was inconclusive.
“Europe certainly is the slowest-motion train wreck in the history of the financial world,” Ablin said.
Most investment advisers urge people not to make radical moves with their portfolios or trade in and out of positions to try to anticipate the next news out of Europe.
“What you can do is make sure that your asset allocation makes sense for your goals, that you are saving enough money, and that you are in solid investments that will be able to ride out a very volatile storm,” wrote Jeremy Glaser, markets editor for Morningstar, in a web article. “This might not be the most exciting plan in the world, but given the huge range of outcomes in Europe, it appears to be the most prudent.”