By Barbara Kollmeyer, MarketWatch
Fears of a 'Greece-like fiasco' in the Iberian nation
brewing
On a day that saw most European bourses and Wall Street shut for
holidays, losses piled up for markets in Spain and Greece after
regional elections yielded political upsets in one, and signs of a
worsening debt crisis cropped up in another.
In afternoon trading, losses for the Spain IBEX 35 index
surpassed 2% on Monday, while Greece's Athex Composite Share index
, tumbled 3%. In sympathy with those regional losses, the FTSE MIB
Italy index dropped 2% and the Portugal PSI 20 index fell around
1.8%
The French CAC 40 , one of the few other bourses open, with U.K.
and Germany shut, fell 0.6%. Wall Street is shut down for the
Memorial Day holiday.
Banks in Spain, Greece and Italy, along with France, bore the
brunt of losses.
The euro also came under renewed pressure against the dollar
(EURUSD) , dropping to $1.0977 versus $1.1005 in late New York
trading on Friday. The dollar recorded its first weekly gain
against the euro in five weeks on Friday.
An upset in Spain: In regional and municipal elections in Spain
on Sunday, the governing Popular Party was severely punished with
surprising wins for leftist Podemos (We Can) and center-right
Ciudadanos (Citizens). Upsets were expected in politically
important cities of Barcelona and Madrid as voters, fed up with
austerity and corruption, cast support to those upstart parties.
The PP suffered its worst result in 20 years with regards to local
elections.
In the wealthy Catalonia region, the Barcelona mayor's race was
won by housing activist Ada Colau, who founded an advocacy group
that stages protests to block evictions of people who can't pay
their mortgages. She is possibly the first of a new generation of
so-called "Indignados," or protesters, to win election to a major
public office. The Popular Party could also face difficulties
forming functional governments in several former strongholds.
Colau beat the incumbent candidate of a Convergence and Union, a
conservative party that has long dominated the region.
Read: Spain's governing Popular Party suffers losses in regional
elections
(http://www.marketwatch.com/story/spains-governing-popular-party-suffers-losses-in-regional-elections-2015-05-25)
Fearing a repeat of Greece: Ilya Spivak, currency strategist at
DailyFx.com, said in a note that the outcome of the Spanish
elections has underscored a growing influence from Podemos, "an
antiausterity party in the mold of Greece's now-ruling Syriza."
He said the negative reaction seen for the euro reflects fears
that the results could be a foretaste of the general election
expected in November, which could see Podemos emerging as a
"kingmaker in coalition negotiation. That would raise the
possibility of a Greece-like fiasco in the Eurozone's
fourth-largest economy," he said.
Added, Predrag Dukic, senior equity sales trader, in emailed
comments: "The market is already pricing in a November election, in
which no party will have an outright majority."
Read: Spain's governing Popular Party suffers losses in regional
elections
(http://www.marketwatch.com/story/spains-governing-popular-party-suffers-losses-in-regional-elections-2015-05-25)
The euro and what few European bourses were open were also
pressured by fresh Greece worries. On Sunday, the country's
interior minister, Nikos Voutsis, told privately owned television
station Mega that his country won't be able to meet EUR1.54 billion
of payments
(http://www.marketwatch.com/story/greece-wont-meet-imf-repayments-in-june-interior-minister-says-2015-05-24)
due to the International Monetary Fund between June 5 and 19. "This
money will not be given," he said. "It does not exist."
Michala Marcussen, global head of economist at Société Générale,
said the situation for Greece is unlikely to get really ugly before
July as the country would still have a grace period to make that
payment.
"The key risk that we see in the very short term is that all the
talk of late payments causes further panic in Greece triggering
bank runs and forcing capital controls," she said in a note on
Sunday.
Opinion: This is how Greece should handle its crisis
(http://www.marketwatch.com/story/this-is-how-greece-should-handle-its-crisis-2015-05-22)
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