(Bloomberg) -- Greece is headed for a snap election after Prime Minister Alexis Tsipras suffered a crushing defeat in European Parliament elections, a move applauded by investors early Monday with yields on 10-year bonds falling to the lowest level since Bloomberg began compiling data.
The vote could come as early as June 30, after the 44-year-old leftist leader admitted the outcome left him little choice. His main opposition, New Democracy, scored about 10 percentage points more than the premier’s own Syriza party.
The Athens stock exchange’s general index rose as much as 5.9% in early trading with banks driving the gains. Yields on Greek bonds narrowed with the 10-year notes falling 34 basis points hitting a record low.
Tsipras has shown himself to be the ultimate political survivor but he could have a hard time staying in the game after such a beating.
The firebrand leader saw himself catapulted into power in 2015 as he led Europe’s most indebted state to a clash with its creditors only to back down after flirting with the country’s expulsion from the euro area.
Greece is back at odds with creditors from the euro area and the International Monetary Fund after Tsipras announced a series of relief measures, including a reduction of the country’s primary surplus target. That move has raised a red flag for loan collectors.
“The market will now cheer a clear New Democracy win, hoping that a new administration will tilt the fiscal mix towards a more growth-friendly manner, and be much better at attracting investment, including much-needed foreign direct investment,” Thanassis Drogossis, head of equities at Athens-based Pantelakis Securities wrote in a note to clients.
A national ballot will postpone any clash with creditors -- for now. New Democracy, which will probably go on to form the next government, will most likely need to review the handouts the incumbent premier promised to Greeks until 2020.
(Adds analyst comment in seventh paragraph.)
--With assistance from Antonis Galanopoulos, Paul Tugwell and Vassilis Karamanis.
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