EU election casts shadow over euro zone as ECB meeting approaches

Sun May 25, 2014 5:12am EDT
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By Ana Nicolaci da Costa

LONDON (Reuters) - Investors this week will be watching the results of elections that could deal a blow to political parties that are key to reform efforts in the European Union and could also fan instability in Ukraine.

The bonds of some struggling euro zone governments sold off last week as investors worried about expected gains for anti-EU parties in European Parliament votes in Greece and Italy.

In Greece, a strong showing by parties opposed to the terms of its EU-led bailout may hurt the fragile coalition government, potentially paving the way for a new national vote.

In Italy, a poor result for Prime Minister Matteo Renzi's party could undermine his drive for swift reforms, which he promised when he took power in a party coup earlier this year.

The rise of anti-EU parties in northern Europe could make it harder for the European Union to deal quickly with any future resurgence of the euro zone crisis, analysts said.

"It looks like we are going to see the far-right parties making further gains and it is going to make it more difficult for the European authorities to deal with any subsequent euro crisis events," said Victoria Clarke, economist at Investec.

Elections for the European Parliament were held from May 22 to 25.

Ukrainians vote in a presidential election on Sunday and if favorite Petro Poroshenko falls short of an absolute majority, market jitters could grow ahead of a second round of voting on June 15.   Continued...

A man casts his vote for the European Parliament and Belgium's general elections in Deurne near Antwerp May 25, 2014. REUTERS/Francois Lenoir