Sep 1st 2015, Greece is heading on general elections amid a more realistic political landscape

Athens, September 1st

·         The recent agreement of July 12^th, between Greece’s government and creditors, led to SYRIZA’s rupture and to the development of a more pro Europe political landscape. More specifically:

o   at the moment, polls are showing that two pro Europe political parties, SYRIZA (ex Eurosceptic but pro Europe after the agreement of July 12th)  and New Democracy fighting neck-and-neck for the 1^st position.

o   SYRIZA’s popularity has gone south compared to last January’s result which was 36.34%. Seven polls record that its popularity reduced to levels between 22.2% and 27.6%. It is important to mention that although Tsipras remains the main political figure of local political scene, his popularity has been diving since the agreement of July 12^th.

o   New Democracy popularity is recorded in polls between 21.1% and 24.2%, which is also lower compared to last January’s results (27.81%) but pursues an increasing trajectory.

o   at the same time, polls show that Eurosceptic parties such as Golden Dawn (neo Nazi) and KKE (communists) are getting, more or less, the same percentage points as it happened in January ’15. More specifically, Golden Dawn is recorded between 6.8% and 5.8% (when it got 6.28% last January) and KKE is recorded between 4.2% and 6.0% (it got 5.47% last January).

o   the new Eurosceptic party LAE generated by SYRIZA’s rupture, still shows low popularity; is recorded between 3.1% and 5.3%. At the same time, a pro Europe party named ‘Enosis Kedroon’ enters the Parliament for the first time, with polls showing results between 3.0% and 4.7%.

o   the other two pro Europe political parties are recorded in polls i.e. a) Potami between 5.0% and 6.1% and b) PASOK between 3.2 and 4.5%

o   last but not least, polls are showing that the populist and nationalist ally of Tsipras, Kammenos won’t enter in the next Parliament (results between 1.7% and 3.0%).

As a result, the big picture shows a shift of local political landscape towards a pro Europe profile, which is in accordance to the general pro Europe profile of Greek society (70-80% pro Europe). 

·         SYRIZA’s pre-election program includes a series of privatisations which was opposing in the past, such as: 1) the Piraeus Port Authority (OLP) 2) the Thessaloniki Port Authority (OLTH), 3) the regional airports 4) the development of old Athens airport plot at Elliniko 5) the Astir Palace Resort at Vouliagmeni 6) the state plot of Afandou at Rhodes island 7,8) the sale of railway companies TRAINOSE and Rosco and 9) the stake in Athens International Airport

·         The caretaker government continues country’s preparations for a) the recapitalization of Greece’s banking system and b) the legislation which is required by the government which will be formed after elections in order that Greece will meet its obligations which are listed in the 3^rd MoU.  The appointment of Houliarakis as caretaker Finance minister, who was country’s main negotiator during discussions ended to the agreement of July 12^th, guarantees the continuity of business.

·         Both Chancellor Merkel and IMF’s Managing Director Lagarde ruled out both Greece’s debt write off and reduction of interest rates and confirmed their common point of view as regards debt’s restructuring through extensions of loans.

·         Despite the escalating political uncertainty and the slight decrease of sales (-2%), Greece’s 182 listed companies showed a remarkable improvement of 1H'15 semi-annual corporate results. More specifically, they showed an increase by 27.5% of EBITDA and an increase by 136% of profitability (before taxes). The main reasons behind this significant development, are the following a) reduction of price of fuels b) increase of exports and c) restructuring programs which enhanced productivity.

·         Capital controls impacted negatively retailing industry in July August. More specifically,

o   8 out of 10 small and medium inteprise showed lower sales with a weighted average of reduction of -30%

o   retailers’ total sales during summer reached the level of 9.3 bios euros, which is lower by -12.7% compared to summer 2014 (10.6 bios euros)

o   on the other hand, sales for food and fuels showed an increase of +8.3% amid a reduction in other parts of retail industry where sales dropped by -45.1%. Consumption for clothes and shoes dropped by more than -80%

Risk assessment: Greece’s overall political risk appear to be significantly lower after a 6 year period which was characterized by significant political uncertainty.

It becomes evident that the turning point was the agreement of July 12^th between SYRIZA’s government and creditors. As it was stated before, the local political system is going through a tough restructuring which is necessary in order to adapt to new international environment.

However, there are significant risks ahead which are related to the formation of new government vis-à-vis the popularity of Tsipras. All polls are showing that Tsipras’ popularity have gone south and a potential disaster of SYRIZA in the forthcoming elections will create a power vacuum in SYRIZA and make the formation of coalition government a very difficult task.  At the same time, New Democracy’s leader Meimarakis is gaining popularity but is still far from becoming the main political figure in local political scene. The formation of caretaker government which could continue to govern mitigates this risk.

Greece’s critical path for exiting the current political/economic crisis will be the formation of coalition government after elections and the implementation of first package of measures as regards the 3^rd MoU. The document agreed between Tsipras and creditors shows significant increases of taxes, which will further increase the burden on regular economy and which will be carried mainly by the usual suspects (employees and pensioners). The negative impact of higher taxes to consumption combined with higher taxes will also impact small and medium enterprises.

The local economy needs a) political stability within European context and this requires the formation of a coalition government after the forthcoming elections and b) a plan to escape from asphyxiation from taxes which requires significant state’s expenses cuts.