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Greek stock exchange posts sharp gains 3 days ahead of crucial national election

By: Nicholas Paphitis, The Associated Press

Posted: 06/14/2012 9:54 AM | Comments: 0 | Last Modified: 06/14/2012 2:38 PM

A worker places posters for an elections rally of the New Democracy party, with a Greek flag, the radical left-wing Syriza party and Communistic KKE party, at Syntagma square in central Athens, Thursday, June 14, 2012. Greece faces crucial national elections on Sunday, that could ultimately determine whether the debt-saddled, recession bound country remains in the eurozone. (AP Photo/Petros Karadjias)

ATHENS, Greece - Greek stocks rocketed higher on Thursday, reflecting investor hopes that the national elections in three days will yield a government that can avoid a messy confrontation with Athens' bailout creditors and keep the country in the eurozone.

Investors appeared to be reacting to market rumours of new public opinion polls, which cannot be openly released because Greek law forbids their publication in the last two weeks of campaigning. Athens' main stock index closed a stunning 10.1 per cent higher, with banking shares up a collective 23.6 per cent.

Popular resentment of austerity measures, which Greece had to take as a condition of receiving its rescue loans, has fueled a surge in popularity for political parties that want to renege on the country's bailout terms.

Sunday's election is seen as a close race between the biggest such party, the radical left Syriza, and the conservative New Democracy party, which wants to largely adhere to bailout pledges, with tweaks in favour of low earners.

"There's an investor sentiment build-up, ahead of the elections, that there might be a pro-European government formed, which the market has discounted," Eurobank EFG analyst Nikos Koskoletos said. "Nevertheless, we remain in highly volatile territory."

Greece's creditors — its European partners and the International Monetary Fund — have warned that the cash lifeline would dry up if a new government played tough and tried to unilaterally abandon previous pledges for further cutbacks and reforms. Without the money, Greece would go bankrupt and likely have to leave the 17-country eurozone.

Sergios Melahrinos, an analyst at Solidus Securities, said Thursday's stock rally seemed fragile.

"This is not a solidly-founded reaction, it is based on rumours and expectations rather than facts," he said. "And these can very easily be disproved tomorrow, or on Monday after the elections."

Before market rumours began this week, the latest official polls released showed that either New Democracy or Syriza could win on Sunday, although without enough seats in parliament to govern alone.

The polls, however, suggested that in either case the winner would be able to win enough support from like-minded parties to form a coalition.

Syriza leader Alexis Tsipras insisted Thursday that he could scrap Greece's bailout commitments while keeping the country in the eurozone.

"On Monday, the bailout commitments will end," he told a rally in central Athens.

Tsipras, 37, accused critics of "terrorizing" voters by arguing that an anti-austerity ballot will leave the country worse off than it already is

"Our answer to scaremongers and speculators is this: Don't put your money on a Greek exit from the eurozone. You'll be the losers," Tsipras said.

A first election on May 6 produced a hung parliament, with Syriza a surprise runner-up to New Democracy as Greeks turned their backs on pro-bailout parties seen as responsible for more than two years of deep financial hardship. But days of negotiations failed to deliver a coalition agreement.

Billions of euros have been wiped off the Athens stock market since Greece's financial crisis broke in late 2009, and the stock index has dropped over 60 per cent in the past year.

Last month, it hit a 22-year low, with the benchmark general index falling under 500 points — compared to a historic high of nearly 6,500 points in 1999.

Meanwhile, Greece remains in a fifth year of recession and unemployment keeps rising.

On Thursday, Greece's statistical authority said unemployment climbed to a high of 22.6 per cent in the first quarter of 2012, compared to 15.9 per cent a year earlier and 20.7 per cent in the last three months of 2011.

A total 1.1 million people are jobless in the country of nearly 11 million. Worst-hit was the 15-24 age group, where a stunning 52.7 per cent are without a job. Among women in the same age group, the rate was 60 per cent.

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