Sep 19th, 2015, Greece is heading on a neck and neck elections, but a string of latest polls indicate SYRIZA’s marginal lead

·         Greece elections continue to appear as a neck and neck battle. After last Wednesday’s polls which were showing a narrow lead of New Democracy, eight polls were published during the last two days indicating a marginal lead of SYRIZA, which varies from 0.5 up to 3.0%.  

·         All polls were showing that Golden Dawn (neo Nazi) will end up third, and three political parties will be fighting to surpass the threshold of 3% and enter in the next parliament i.e. Union of Centrist (pro Europe, one man show party), Popular Unity (former SYRIZA euro sceptics) and Independent Greeks (former Tsipras’ government ally). Last but not least, undecided/undefined voters are recorded above the level of 10% which is crucial for the final outcome.

·         In an effort to attract the undecided voters, the two main rivals avoided to talk about the real agenda and used tough accusations against their rivals on corruption related matters. More specifically:

o   SYRIZA’s Tsipras urged the Greek voters during his last speech at Syntagma Square that these elections represent the last opportunity to battle with Greece’s elites and corruption, which are linked to New Democracy.

o   New Democracy’s Meimarakis during his interview at SKAI TV station accused SYRIZA that is heavily involved in corruption mentioning a) the last conflict of interest case of Flabouraris, who is the former minister of state and mentor of Tsipras and b) that there are SYRIZA’s MPs who made profit out of Grexit scenario, implying the number of SYRIZA's ministers who withhold investment portfolios which also includes hedge funds.

·         ECB’s Draghi urged Greece to reform its pension system in order to prevent it from its collapse.  According to Reuters, Draghi mentioned in his response to a MEP’s request that “The sustainability of the pension system is crucial from a social fairness perspective, not least because it is necessary to ensure that the Greek state remains able to pay pensions in the longer term,”.

·         According to Greek Tourism Federation, the tourists arrivals at Greece’s airports increased +by 6.3% during the Jan-Aug period (vs. +16.5% during the same period last year). According to Greek Statistics Authority (HELSTAT), the total turnover generated by tourism increase by +10.9% during Jan-Jun period (vs an increase of +17.2% during the same period last year). It appears that the turnover increase during the 2^nd quarter of 2015 showed an increase of 13.4% vs. an increase of 6.7% which occurred during the 1^st quarter 2015.

·         The services sector of Greek increased its share to 85.2% of GDP according to HELSTAT. It appears that services sector has gradually increased its share from 82.1% in 2010, due to tourism. The total number of tourists arrivals for 2015, is expected to cross the level of 25.5 mios which represents an increase of 8-10%.

Risk assessment. It is still very difficult to predict Greece’s elections outcome. Undecided voters (>10%) will determine the final outcome. In addition, weather forecast indicate a glorious Sunday, which increases probability to keep a number of voters away.

In general, the probability of a Grexit scenario has been diminished dramatically and secondly the country risk profile has been significantly lowered compared to the period before July 13^th. This is also reflected to the 10 year bond yield which dropped below 8.30% yesterday (compared to close to 20% before July 13^th).

These elections are very different compared to all previous ones because the previous dilemmas such as memorandum vs. anti-memorandum, Europe vs. Grexit have ceased to exist. In these elections, most political parties agree on euro, implementation of 3rd MoU and structural reforms.

In addition, it is highly likely that no political party will win the majority of next parliament. But even if there is a majority, it is highly unlikely that Greece will have one-party government.

It is highly likely that the 2 out of three, small political parties which struggle to enter in the next parliament, will fail to achieve this target. Assuming that the next parliament will have 7 political parties and no parliamentary majority, we could have the following scenarios

1.       SYRIZA win. Tsipras has rejected the ‘Grand Coalition’ scenario, hence he will aim to achieve a coalition government with PASOK, Potami and LAE (if it achieves its entry in next parliament).

a.       SYRIZA won’t be able to form a coalition government with LAE because a) there is no ground for an agreement as regards the implementation of 3^rd MoU b) PASOK and Potami won’t agree to participate in a coalition government with a Eurosceptic party such as LAE.

b.      SYRIZA will aim to form a coalition government with PASOK and Potami, which is feasible and highly likely. The basis of the coalition government will be the 3^rd MoU which has been ratified by all three political parties. New Democracy will remain the main opposition political party but within European Context, hence it will also ratify the agreement of Greek debt restructuring which . Greece’s return to normality will occur at slow pace.

c.       The scenario of a coalition government between SYRIZA and Independent Greeks (the same government as before), it highly unlikely. This due to low probabilities that Independent Greeks will surpass the 3% threshold and enter parliament.

2.       New Democracy win. Meimarakis has pledged to invite PASOK, Potami and SYRIZA. Tsipras will reject this offer, perhaps PASOK won’t participate but offer vote of tolerance.

 

      PASOK will try to capitalise from SYRIZA's internal rupture and probably will remain out of coalition  government but will offer vote of tolerance and will ratify the Greek debt restructuring agreement.

 

       New Democracy and Potami will form a coalition government, which is highly likely. The new government will proceed on the implementation of SYRIZA’s 3^rd MoU.  They will implement the legislation which included in 3rd MoU using as justification that it was agreed between Tsipras and creditors. Greece’s return to normality will occur at a faster pace.

3.      

Grand coalition scenario is highly unlikely because both main rivals will probable get over 30% of electorate leaving the role of opposition to Golden Dawn (neo Nazi).