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Tuesday, October 07, 2014 9:10 PM

Early Elections in Greece Increasingly Likely, So Is Grexit; Promises, Promises

Mish Moved to MishTalk.Com Click to Visit.

Talk is in the air, but it's not to the liking of eurozone Nannycrats. Please consider Idiosyncratic Risk Looms For Greek Assets, Citi Says.

Citi Research said in a note today that: “Possible deadlock in the early-2015 vote among MPs to choose the next Greek President could trigger early national parliamentary elections in Greece in spring 2015, in our view, with a distinct possibility that the next government will be led by the opposition, anti-bailout party Syriza.”

Syriza has gained seats in the European Parliament, with one more than the ruling New Democracy party of Prime Minister Antonis Samaras. Syriza’s leader, Alexis Tsipras, has campaigned against budget cuts tied to Greece’s 240 billion euro ($303 billion) bailout from the International Monetary fund and Euro area. Tsipras and Syriza have been calling for immediate national elections since May.
Syriza’s Leader Could Win the Next Election

The Economist spells things out a bit more clearly in Syriza’s Leader Could Win the Next Election.
Talk of an early general election is in the air: New Democracy and the PanHellenic Socialist Movement need 180 votes in parliament next February to choose a new president to replace the incumbent, Karolos Papoulias, who is retiring from politics. With only 154 lawmakers between them, it will be a struggle to round up the extra votes from a pool of fractious independents and moderate left-wingers. If they fail, an early general election will be held. Mr Tsipras is in pole position to win.

Three recent opinion polls showed Syriza’s lead over New Democracy widening to up to five percentage points, which, if replicated at a general election, would leave Syriza just ten seats short of a parliamentary majority. One of the latest polls, published on September 27th, shocked the government: it gave Syriza a lead of 11 percentage points over New Democracy.

Mr Tsipras is no longer pledging to rip up Greece’s bail-out agreement, yet many are still suspicious of his new €11 billion ($14 billion) tax-and-spend economic programme. It calls, among other things, for restoring the minimum monthly salary to €750 (about 60% higher than the average salary now being paid by cash-strapped private employers), cracking down on tax evasion, creating 300,000 new jobs and restoring Christmas bonuses for pensioners. “It’s much too good to be true,” sighed Koula Peristeri, an unemployed factory worker who nonetheless supports Syriza.

Antonis Samaras, the centre-right prime minister, has riposted with his own promises. Next year’s budget will include tax breaks for hard-pressed households, including cuts in levies on property and heating fuel. There is even talk of reducing the corporate tax rate from 26% to 20%.

Mr Samaras would like to go further but he is constrained by the “troika” of bail-out monitors from the EU, the European Central Bank and IMF.
Promises Cannot Be Met

Both parties are making promises they cannot keep. There is no realistic way Samaras can keep his promises. If he could, he would have already.

And there is no realistic way for Tsipras to raise salaries by 60%. But that is precisely what people want to believe.

People Have Had Enough

The important factor is people have had enough, and when they have, the tendency is to vote out politicians who did not keep promises for the next set of leaders who also are 100% guaranteed to break promises.

Thus, if there is an early election, and that seems increasingly likely, Tsipras will win.

If so, please bear in mind that Greek Elections Rules are such that the overall winner, even by a slight plurality, gets an extra 50 seats in parliament. The law helps the party or coalition that wins a plurality to achieve an absolute majority (151 out of 300 parliamentary seats).

That is how Samaras came to rule, and it will be how Tsipras will come to rule unless early elections do not happen.

Primary Account Surplus

There are questions over accounting, but Greek Budget Records 1.2B Euro Primary Surplus in Jan-May‏.

A primary surplus is quite important. It means that Greece no longer needs external funding to pay its bills. Excluding the debt repayment program, Greece's primary surplus totaled 1.6 billion euros.

If accurate, and sustainable, Greece is actually in a position to tell the Troika "Go to Hell" declaring all debt repayment null and void.  Yet to do that, Greece would have to abandon the euro and put up with God knows what in sanction retaliations.

If Tsipras chooses that path, there is no way for salaries to rise 60% with the account surplus intact.

Which Promises will Tsipras Keep?

  1. Keep Greece on the Euro.
  2. Raise Pay by 60%.
  3. None of the Above.

I vote for door number 3. Time will tell.

Meanwhile, I have a musical tribute for the upcoming election.

Promises, Promises

Link if video does not play: Dionne Warwick - Promises, Promises

Mike "Mish" Shedlock

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