Greece is teetering on the edge of a new political crisis

Jessica Morris
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Greek stocks have been down today (Source: Getty)

Greek stocks were pummelled today after a key vote failed to result in a new president, pushing the country towards early general elections in January.

Greece's blue chip index closed down around 3.9 per cent today, having fallen as much as 11 per cent earlier, dragged down by banks such as the National Bank of Greece and Alpha Bank which suffered heavy selling.

Government bond yields surged as investors bet Greece was increasingly likely to default on its debts.

Today's vote, which was the third and final round of voting, failed to appoint a successor to President Karolos Papoulias. The lack of consensus triggers snap elections and the dissolution of parliament. Prime Minister Antonis Samaras has set the date for the parliamentary elections as 25 January.

Commentators fear this could jeopardise the country's international bailout programme by paving the way for anti-austerity party Syriza to come into power. Opinion polls point to victory for the radical leftist-party which wants to cancel Greece's 240bn (£188m) bailout plan from the European Union and the International Monetary Fund (IMF).

An electoral victory would mark the first time an anti-austerity party has come to power in Europe since the onset of the eurozone crisis in 2011. At worst this could ignite similar sentiments in other peripheral European countries such as Spain and Italy.

Spain's Ibex and Italy's FTSE MIB both closed down around 1.3 per cent.

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