ATHENS--The political turmoil gripping Greece is already
beginning to affect the local market and could have lasting damage
on the country's nascent economic recovery, its central banker
warned Monday.
Speaking just days before Greece's parliament is due to hold the
first in a series of contentious votes to elect a new head of
state, Bank of Greece Governor Yannis Stournaras said the political
uncertainty was "taking on serious dimensions," and pointing to a
reduction in liquidity in the market.
The votes--the first of which is scheduled for Wednesday, the
last tentatively for Dec. 29--will determine whether Greece will be
forced to hold snap general elections in January. The move to hold
the votes sooner than originally planned has reawakened fears of
political turmoil in the country at the center of the eurozone debt
crisis.
Under Greece's constitution, Parliament must elect a new
president every five years. But if none is picked after three
rounds of votes, the chamber is dissolved and national elections
called.
Those fears came into sharp focus last week as investors dumped
Greek stocks and bonds amid the political uncertainty.
Many analysts fear that both the current uncertainty, and the
risk of national elections in the near future, could also crimp
Greece's recovery following six years of recession--a fear
expressed by Mr. Stournaras as well.
"There is a risk that the growth that has only just started to
resume may be halted, but there is also a large risk of
irreversible damage being done to the Greek economy," he said.
The latest third-quarter data show that Greece's economy
returned to growth this year, ending one of the steepest and
longest contractions in postwar European history. For the full
year, Greece's gross domestic product is expected to expand by 0.6%
and by 2.9% next year.
But the six years of recession, made worse by years of austerity
aimed at fixing the country's public finances, have left deep
scars. Roughly one- quarter of the workforce is unemployed,
standards of living have been rolled back a decade and tens of
thousands of businesses have gone bankrupt.
Write to Stelios Bouras at stelios.bouras@wsj.com
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