The markets' confidence in Greece has apparently received a distinct filip from the of snap elections in the country, as Greek Prime Minister Alexis Tsipras announced his resignation and the holding of an early election hours after his hard left party suffered a convincing defeat on Sunday during a European Parliament election.
Goldman Sachs on Tuesday said the holding of a snap election is a positive event, as is the prospect of an election victory by main opposition New Democracy.
GS said political developments in the country and the dynamism of economic recovery are favorable on a medium-term basis for fiscal policy and the overall course of the Greek economy in the short term.
The world's foremost investment bank nevertheless warned that challenges remain in the mid-term period.
The briefing by Goldman Sachs points to the very positive reaction to the snap election announcement by the markets, while adding that investors judge that a new ND government boost confidence and thus exert even more downward pressure on bond yields. The latter will create more favorable borrowing conditions and support economic growth.
Analysts also noted that a possible ND government in Greece will be less likely to overturn structural reforms already implemented.
Among others, Reuters on Monday reported that Shares of Vancouver-based Eldorado Gold rose as much as 14.6% during the day on investors' optimism that the snap poll in Greece would deliver a new and more pro-business party to power, and thus licensing obstacles that the miner has faced over the past few years under the SYRIZA government.