Fireman Samaras

Greece tries risky step to dispel uncertainty

Antonis Samaras' decision to bring forward Greece's presidential election by two months, to December 17, looks like clever politics. Following a decision by euro zone finance ministers to extend the country's bailout by the same two months - which he sees as a victory - the Greek prime minister wants to clear the air and show that he is in control.

Yet the decision is fraught with risk. It could pave the way to power for populist party Syriza, and doesn't dispel the serious doubts that have risen about Samaras' policies in recent months. Greece could wind up in another financial and political turmoil.

The December 17 presidential election doesn't really matter in itself. The key issue is whether Samaras' ruling party can muster a majority to choose someone to occupy the symbolic job.

If not, parliamentary elections must be called.

After the Eurogroup's decision on the bailout extension, Samaras can point to the near-end of humiliating quarterly visits by the "troika" of public creditors, tasked with verifying Greece's compliance with the programme. The hope is that this will weaken some of Syriza's arguments, but this could prove optimistic - if only because the International Monetary Fund's part of the bailout will continue to run until 2016. Syriza will still have a straw man to raise electoral passions.

But Samaras' policies are also to blame for his current predicament. He has worried his euro zone partners in recent months by moving away from the reform path he had earlier agreed on. Going soft on tax evasion, for example, didn't go down well with markets. Greek 10-year bond yields have soared from their 5.6 per cent September lows to 7.8 per cent now. Spreads over German bunds, meanwhile, have widened by almost 250 basis points.

Euro zone authorities have taken a risk by agreeing that Greece could be on its own as soon as next March - albeit with a credit line from the bailout fund. For his part, Samaras is now taking another gamble, hoping to deliver on his part of the bargain. Syriza is the big problem on his horizon, but by no means the only one.