Given the economic uncertainty in Greece, many investors were interested in the results of the Greek election last weekend that resulted in New Democracy (ND) leader Antonio Samaras winning.

However, in Friday’s issue of Barclays Capital’s weekly research, analysts predicted that the final election result will have little impact on the country’s austerity program. Instead, Barclays said that investors should look out for the results of the European Union Summit on June 28 and 29.

Furthermore, they said that Spain is currently a bigger concern for the financial markets They added that the market should remain cautious because of the poor market reaction to the Spanish bank bail-outs. Analysts gave several probable reasons for their warning such as the lack of details regarding the bail-outs, the concerns over private bondholders being subordinated, as well as the fact that the sovereign took the liability instead of choosing the route of direct capitalization through the European Financial Stability Facility.

Before the elections, analysts explained that the winner was not as relevant in terms of the austerity measures since the leaders of both ND and the radical left party Syriza will attempt to renegotiate the country’s austerity program. Barclays said that the difference between the parties was in their particular tone.

For instance, Samaras had merely indicated that he plans to reverse cuts on low income pensioners, cut a few taxes, and not reduce spending. This campaign is in direct opposition to the currently established program, in which the government needs to make additional austerity actions from 2013-15. On the other hand, Barclays analysts said that Syriza’s head Alexis Tsipras was more “strident” in his statements. For example, he said, “The memorandum of bankruptcy will belong to the past on Monday."

However, even if there are no changes made to Greece’s austerity program, Barclays analysts explained that the country will have difficulty making deficit targets. They had mentioned several factors supporting this statement including the continued deterioration of the country’s economy, the challenges to its privatization goals, and the pick-up in capital flight.

Analysts predicted that the election results will have the greatest impact on capital flight. With ND’s victory, Barclays did not anticipate a huge effect on the big rate sell-off in safe-haven markets since the greater concern is over Greek re-negotiations and about what is happening in Spain. By contrast, if Syriza had won, they believed that capital flight out of Southern Europe might have increased.

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