Aug 31st 2015, More polls indicate that Greece’s elections will be a neck-and-neck race

Athens, August 31st 

·         seven polls were published during weekend indicating a narrow gap between leading political parties SYRIZA & New Democracy, which varies between 3.1% and 1%.

·         all polls show that Greece’s new parliament will include eight political parties. They also show that Kammenos, the leader of Independent Greeks and Tsipras’ ally, won’t succeed in entering Parliament.

·         polls also indicate that elections will end up to a hung parliament. It appears that the formation of coalition government is one way road due to numerous and complicated obligations agreed with the 3^rd MoU and worsening economic conditions.

·         a series of economic indicators published in July showed that local economic will return to negative territory in 2H15. However, there are signs that the degree of economic contraction could be less negative than initially expected. More specifically:  

o   the on-going China-centric crisis helps a reduction of price of oil, which will further assist both local and eurozone’s economic activity.

o   according to data published by the Bank of Greece, arrivals of tourists increased by 12.4% in July ’15 (on annual basis) vs. 13.7% in June. This occurred despite the implementation of capital controls and the uncertainties related to referendum which could have impacted touristic product during July.

o   furthermore, according to more recent data published by Confederation of Greek Tourism (SETE), the number of arrivals increased by 6.9% during Jan-Jul which is the result of an increase by 5.3% in July. In addition, the chairman of SETE stated during weekend that Autumn’s revenues from tourism will further increase and cross the level of 3.2 bios euros and the number of tourists will reach the level of 5.5 mios. Finally, he expects that number of tourists’ arrivals in 2015 will cross the level of 26 mios  which a historical record.

·         it seems that gradual restoration of confidence assists on the return of deposits to local Banks. Consequently, the Bank of Greece gradually takes positive steps towards relaxation of capital controls. More specifically,

o   the daily limit for bank’s business transactions abroad has been increased from 5 to 7 mios euros.

o   the monthly maximum overseas transfer limit for institutions has been set at 40 mios euros, while the threshold for similar transactions by individuals has been set at 500 euros.

Risk assessment: despite the fact, that Tsipras has refused to cooperate with other pro Europe political parties after elections, the formation of a coalition government between SYRIZA (left), New Democracy (centre right), Potami (centre) and PASOK (centre left) appears to be one-way road. My estimate is that there will be two possibilities: a) either we’ll have a coalition government without Tsipras as prime minister b) or the current caretaker government will continue to operate after elections. Actually, the caretaker government is the result of a compromise between SYRIZA and pro Europe opposition.

I do believe that the implementation of capital controls will continue for a long period of time as regards the transactions with cash. This is due to the significant increase of usage of banks’ debit cards for every day’s transactions. As a result, capital controls will gradually decrease the significantly bigger local black economy and this will help to the increase of state revenues.