Radical Left wing party Syriza won the Greek election last night, days after the European Central Bank (ECB) announced a programme of quantitative easing (QE) worth â¬1.1 trillion.
Although Syriza was widely expected to win, the victory has put the Greek debt problem back to the forefront of investors' minds.
"Markets have been worried for some time about Syriza leading a Greek government due to its stated aims to increase public spending, raise the minimum wage and negotiate a debt restructuring with the EU and ECB," says Darren Ruane, head of fixed interest at Investec Wealth & Investment.
Given that Syriza has never governed a country before and is made up of disparate left wing factions, this is a cause for concern, he says.
While Syriza's aim to renegotiate Greece's debt with the troika of the EU, the ECB and International Monetary Fund may concern some, Paras Anand, head of European equities at Fidelity Worldwide Investment, doesn't think the consequences will be overly severe.
"I would argue that there are reasons to believe that the impact for European investors and even for economic growth across the region may be more modest than feared," he says.
While the ECB's QE programme doesn't extend to buying Greek bonds as they are below investment grade, there is still a fear that Syriza's victory will have a negative impact on the country's bonds.
"Extending the maturities and interest rate cuts should impact sentiment in Greek's bond markets negatively. Pressure on Greece's bonds to fall further is likely. At risk too are Greek bank stocks that hold government debt of Greece," says Viktor Nossek, director of research at WisdomTree Europe.
A Greek exit from the euro – or "Grexit" – doesn't seem to be likely any time soon. The renegotiation of Greek debt is top of Syriza's agenda and as Europe fears that a Grexit may be a contagion risk for other heavily indebted countries such as Italy, Ireland, Portugal and Spain, it's likely that the Troika will come to terms with Syriza.
The market's reaction to last night's election has not been overly extreme with Greek government bond yields 37 basis points higher at 8.55% for 10-year debt. By contrast, bond yields from countries such as Italy, Spain and Portugal are trading tighter as the outcome to the election was in line with expectations, according to Ruane.
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