Expect a Blowout Win by Syriza in Greece

Conventional wisdom on Greece is that Syriza will win but will fall short of winning a sufficient margin to avoid having to form a coalition.

From Bloomberg Racing to Catch Syriza

"It will prove hard for Syriza to secure a majority in the 300-seat parliament, and even if they do, it will still be a fragile, slim majority," said Aristides Hatzis, an associate professor of law and economics at the University of Athens.

A Wall Street Journal report yesterday said "most surveys indicate that Syriza wouldn’t be able to secure enough votes—even with the bonus—to get an absolute majority in Parliament, forcing it to seek coalition partners."

The question then would be "coalition with whom?"

However, I am going out on a limb here. I suggest the likelihood of a shocking blowout by Syriza increases by the day. I offer two reasons for my unconventional prediction.

France Open to Negotiations

Yesterday, French finance minister Michel Sapin said France Open to Debt Dialogue with Greece.

French finance minister Michel Sapin has called on eurozone nations to respect the outcome of next Sunday’s election in Greece, saying that the EU should be ready to negotiate with the country’s new leaders on restructuring its huge public debts or extending the terms of its bailout.

“Whatever the result of the election will be, it is absolutely fair and legitimate that discussions should take place between the EU and the new Greek government,” he said. “What we would think is extremely important is the stability of the eurozone.

The remarks from Mr Sapin suggest that France is prepared to take a more conciliatory approach.

New Democracy Loses Credibility 

New Democracy leader and current prime minister Antonis Samaras repeatedly stated that bargaining over the bailouts was not possible.

In support of that view, four days ago I reported Finland Opposes Greece Bailout Deal; Contagion Catch 22; No Scope for Solution.

However, France is far more important than Finland, at least psychologically.

In Eurozone rules, every vote theoretically counts the same, but Greek voters are highly likely to believe what they want to believe.

Property Tax Backlash

More importantly, Greek voters are fed up with lies from Samaras and cave-ins to the Troika. That backlash has fueled a surge for Syriza.

The Financial Times reports Property Tax Backlash Underpins Syriza’s Poll Prospects

Aspasia Glynou has endured a barrage of pension cuts and tax increases during Greece’s six-year recession in which her monthly income has fallen by almost half.

But a property tax pushed through by Greece’s coalition government and then made permanent is more than the 68-year-old Athenian widow and conservative voter can bear.

“My late husband would be shocked that I could vote for an ex-communist like Alexis [Tsipras, the Syriza leader] but I think it’s time I took a stand,” said Ms Glynou in her spacious fourth-floor apartment in the capital’s once prosperous Halandri suburb. “Most of my pension now goes to pay [property tax] instalments.”

Known as Enfia, the annual levy on private property was introduced under pressure from Greece’s creditors — the so-called troika of the European Commission, the European Central Bank and the International Monetary Fund — in 2011 as an emergency revenue-raising measure. It was justified on the grounds that an across-the-board annual property tax would bring Greece into line with other eurozone member states.

The centre-right government of Antonis Samaras, the prime minister, last year made Enfia permanent. It estimates the levy, which replaces a special tax on high-end property, will boost revenues by at least €3.4bn a year, equal to almost 2 per cent of national output.

But policy makers failed to account for the fury it would provoke among Greek taxpayers, who have traditionally invested in property as a hedge against the country’s high inflation rates. According to local bankers, about 80 per cent of Greek residents own at least one property, even if they live in rented accommodation.

On the campaign trail last week Mr Tsipras pledged to roll back Enfia if he comes to power and instead restore the levy on high-end real estate. That would reduce budget revenues by an estimated €2bn, but a Syriza-led government would cover the shortfall through a crackdown on tax evasion by wealthy Greeks who have been protected by New Democracy, Mr Tsipras said.

Last Minute Breaks

I have no particular insight on Greek psychology per se. Yet, politically speaking in general, last minute undecided voters in elections (at least in in the US) tend to break strongly in one direction.

I see no reason why Greece should be any different.

Although I am not in Greece, and I cannot even read Greek, the above articles suggest which way the break will happen.

On January 5, in Greek Polls Show Syriza on Cusp of Victory; Greek Political Party Analysis; Intentions Matter Not I commented ...

Syriza's lead has generally been shrinking, but all of the polls have Syriza in the lead. Polls are pretty volatile. Leads swing from 3 to 10 points depending on polling organization. ... But the important factor is all the polls are in agreement. Unless and until that changes, the odds for Syriza are likely better than the polls indicate.

Based on voter break that I expect will strongly favor of Syriza, I now predict a "surprise" blowout of sufficient proportion that no coalition is needed.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com