Talking Points

• PASOK, ND to form new unity government
• New Greek Prime Minister to be Lucas Papademos, PASOK, agreed by Papandreou and Samras
• Deputy Premiers to beEvangelos Venizelos, PASOK; Stavros Dimas, New Democracy
• Papandreou: Elections can be held after February, March

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After a volatile week with former Greek Prime Minister George Papandreou calling and canceling a referendum concerning further austerity and putting in jeopardy Greece’s membership in the EU-17, a G20 meeting bringing Italian government budget woes in the spotlight and ending with a confidence vote confirming Papandreou, markets once again are nervously anticipating new political developments from the Mediterranean country.

Although first statements made by Opposition Leader Antonis Samaras on Friday showed firm disagreement over forming a coalition government with PASOK and New Democracy, urgency prompted by German and French leaders has resulted in a unity government to be formed between the two parties, with Lucas Papademos, PASOK as the new Prime Minister and deputy premier seats split between Finance Minister and current Deputy PM Venizelos and Stavros Dimas, ND.

With a new unity government formed hours before Asian trading in low liquidity hours, markets have not shown a large reaction to the news. At the time of writing, the Euro is 0.174% lower against the dollar, while the Swiss franc leading losers, shedding 0.652% against the buck.

Despite an overall risk-off bias in late Sunday, the new unity government is expected to buoy appetite, as it removes the immediate danger of the Papandreou-caused austerity deadlock that froze payment of the next austerity package in December. However, with the new unity government still having power largely consolidated in the hands of the current PASOK party, the European Debt Crisis in Greece is not expected to be automatically fixed.