Greek Election Result Predictions June 2012

In a word a draw.

I don’t see anyway for there to be a clear winner in the June elections.

It could be touch-and-go when there were two main parties ie PASOK and ND. Now there are 3 main parties with the smaller parties all getting more votes as well.

For this reason I believe conversations about a “winner” are pointless.

If there is a draw, with no party having a clear majority then I see no reason why there would not be a stalemate in negotiations again.

I have said that the 51% requirement to form a government is unnecessary and is causing the country unnecessary problems.

For real progress this artificial law requiring one party to have a majority should be abolished. The local representatives that people in the regions vote for should go to Athens and work together no matter what party they are from.

When a party has 51% they have the power to ram through laws which have led directly to the problems the Greek government is facing today. The tyranny of the majority if you will.

The USA does not require a 51% majority which shows that it is not necessary in Greece, in case you were wondering if a parliament not having a majority was a workable solution. It is.

Back to reality though. There is not a whisper of abolishing the 51% law so Greece can expect new elections at the end of July and again, I see no reason for this third election to produce a government because of the law that says one party must have a 51% majority does not appear to be going anywhere.

I believe the procedure then (if there is no winner after the third election) is to have the president of democracy appoint a government for a period of time until new elections can be held. I do not know how long this government would be in power for but if I had to guess I would say it would be around a year.

What are the consequences of a stalemate in the June elections?

Hard to say. PASOK and ND have ruled out any more tax increases, Syriza have said they will increase taxes.

The troika want assurances that the Greek government will continue to shrink the government deficit. A hung parliament will make it impossible, probably, for there to be any cuts in the government workforce which is the key step in stabilising the economy.

With a hung parliament the troika will be powerless to enforce anymore measures on the country as there will not be a functioning government.

How will they view this?

1. The troika could say well at least things are not going to get any worse and continue with the bailouts.

2. The troika could say that it is unacceptable for things not to progress and refuse more bailout money and force the government into default.

I find option 2 extremely unlikely in which case taxes in Greece will remain unsustainable and the economy will continue its crash.

The media is full of hype saying that the June elections are a vote on the Euro. Something which is misleading at best, all out lies at worst. I will leave you to decide which.

The fact is the June elections, like all elections are a judgement by the people on the competence of their government. The Greek government for the past 4 years has been utterly incompetent, Greek will be voting for something better.

For the political parties to say to the Greek population to forget what they have done over the past years and concentrate on the Euro is a farce at best and blackmail at worst.

The incompetent political class in Greece are trying to get a pass by saying the elections are about the Euro and not about their performance which is not the case.

Ultimately the June elections and the run up to the June elections have been one massive propaganda operation which has tried to turn the Greek government’s financial mismanagement into a Euro problem when in reality the problems in Greece are caused by the Greek government. Until the Greek government is held to account the currency that Greeks use will be entirely irrelevant.

As a side note I will go on a complete limb here and make a prediction about the Golden Dawn votes. In the last election they received a massive 7% of the vote, despite the TV spat that one of their spokesman was involved in I predict they will poll very close to this level again. If the saying “any publicity is good publicity” is true then they should receive more than 7%. Expect a complete overreaction by the media in Greece and abroad if the Golden Dawn were to receive more votes than in the May elections.

So how do I sum up my predictions for the June elections in Greece?

I find it hard to see a result which is anything less than stalemate. What the consequences of this will be only the troika knows. Will they finally say it is time to stop throwing good money after bad or do they belive they are getting good value?

It is hard to imagine them stopping with the bailouts but at the same time it is hard to imagine how Greece can continue in the Euro with its trade deficit and no plans to address the trade deficit.

Whatever the government does with its budget, the fact remains that Greece is sending abroad 20 billion Euros a year that is not being replaced. For Greece to have a future in the Euro this has to be stopped as there is no way for the government to print currency to replace what is being sent abroad.

I am confident that Greece could easily address its trade deficit however I am equally confident that the ruling political class will do everything to make the situation worse, intentionally or unintentionally. I say this because since 2008, since the country first required a bailout all the measures introduced by the government have only inflamed the trade deficit problem.

Taxes have been increased throughout the economy making products and services more expensive and businesses less efficient. An excellent example of this economic sabotage has been the introduction of VAT on house sales.

So we have this situation.

Greece continues with the Euro, every year the country has less and less currency and because of this the country gets more and more into debt until it defaults.

or

The Greek government defaults and exits the Euro so the government can continue with their reckless spending

The question is what will lead to these 2 decisions, will it be the June elections?

It all depends on the troika and how they view the fact that there is no functioning government in Greece.

They have come this far, the only reason the troika would give up at this stage is that they are looking for an excuse.

Personally I believe nothing will change and the bailouts will continue until there is no money left in Greece.

But you have reality getting in the way. The fundamental fact is the trade deficit and the fact that Greece can’t print its own currency. Unless the troika are prepared to look at Greece as a dependent country for eternity the trade deficit issue will bring matters to a head.

I think Germany have made it quite clear that Greece can and should continue in the Euro but if the government in Greece decides it cannot balance its books then the country will have to leave.

As you can tell, there are a lot of dynamics at work here but they boil down to this.

1. Troika’s opinion of a deadlocked parliament

2. The EU’s view of having Greece as a dependent country

3. Germany’s view of having Greece as a dependent

4. Are Greek politicians interested in addressing the trade deficit

 

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