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Greek stocks gain on election hopes

Some see nation finding a way to stay in eurozone

Debt-laden Greece is in the fifth year of a deep recession.

kostas tsironis/Bloomberg News

Debt-laden Greece is in the fifth year of a deep recession.

ATHENS — Greek stock markets rebounded strongly on Monday from a 22-year low on hopes a pro-bailout party will win crucial national elections next month, which would avoid a catastrophic rift with international creditors and keep the struggling country in the euro currency union.

The main stock index in Athens soared to close up 6.9 percent, with the battered bank sector chalking up solid gains.

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Four polls published Sunday reversed previous trends to indicate that the conservative New Democracy party could come in first in the June 17 vote, slightly ahead of the anti-austerity radical left Syriza party.

Although the conservatives would still fall short of a governing majority, the surveys suggested they could form a coalition government with the socialist PASOK party, which has also pledged to stick to Greece’s austerity commitments.

Banks got a boost Monday: The country’s four largest lenders received promised support of $22.62 billion to compensate for losses suffered in a massive debt restructuring earlier this year. The announcement was made by Greece’s Financial Stability Fund after the Athens bourse closed.

Debt-crippled Greece is being kept afloat by huge international rescue loans, granted on condition of harsh cutbacks and policies that slashed living standards.

The austerity, however, caused huge popular resentment of New Democracy and PASOK, the two parties that accepted the terms. Voters expressed that anger clearly in May 6 elections, giving a boost to antibailout parties. But the election proved inconclusive, with none of the parties able to form a coalition government, leaving Greeks to cast more ballots next month.

Greece’s bailout creditors insist that if the country reneges on its austerity pledges, the rescue loans keeping it afloat will stop.

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Greece’s bailout creditors — the other countries in the 17-nation eurozone and the International Monetary Fund — insist that if the country reneges on its austerity commitments, the rescue loans will stop.

That would unleash chaos. The government would be unable to pay hospital workers, police, and teachers, pensions would dry up, and a potential panic run on bank deposits would destroy the tottering financial system. Eventually, the country could be forced to abandon the eurozone, reverting to a vastly devalued form of its old drachma currency.

Fear of such an outcome has battered Greek financial markets for weeks, pushing the Athens General Index to close at a 22-year low of 485.18 points on Friday. The latest polls, however, helped it claw back some of those losses, rising to 518.49.

‘‘This is clearly due to the polls,’’ said Sergios Melahrinos, an analyst at Solidus Securities.

He noted that if the two pro-bailout parties win the election and have Greece honor its austerity commitments, banks would gain access to rescue money needed to avoid collapse. Under the country’s latest international bailout, domestic banks that took huge losses from a bond swap that more than halved Greece’s privately held debt will receive billions of euros to boost their capitalization. If a new government in Athens unilaterally tears up the bailout deal — as Syriza has threatened to do — the recapitalization would fall through.

But Melahrinos warned that the market would remain vulnerable to the ups and downs in the polls in the lead-up to the elections. ‘‘New polls that show a reversal would obviously change the market picture.’’

Sunday’s surveys gave New Democracy a lead over Syriza ranging from 0.5 to 5.7 percent, with PASOK coming in third. The polls also estimated that the two pro-bailout parties would gain a combined 159 to 165 seats in the 300-member Parliament, up from 149 after the May 6 vote.

A survey in To Vima newspaper found that 65 percent want Greece to remain in the eurozone even if it has to implement the bailout agreement as it stands, while 24 percent said they would prefer to exit the euro rather than implement austerity policies.

Since the beginning of 2010, Greeks have suffered repeated income cuts and tax hikes, while unemployment has hit record levels, with more than one in five workers jobless after tens of thousands of businesses closed.

The country is in a fifth year of deep recession and continues to import about twice as much as it exports.

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