Monday, 30 April 2012

Little Greece still matters more than Big France

The prospect of a socialist victory in France’s second round next week is one to have mixed feelings about but, in my opinion, not one to dread.   François Hollande sounds far from hard-line and his rhetoric may be driven more by the need to get elected than by what he reasonably expects to achieve. Meanwhile Sarkozy has been a bit of a flop as a reformist President.

More worrying, in my opinion, is the complete political disintegration of Greece.

Between them, the Panhellenic Socialist Movement (PASOK) and New Democracy have contested the last 12 legislative elections in Greece. The only election in which they didn’t take over 250 of the 300 available seats between them was the 1974 election immediately following the end of the 1965-74 military Junta.  

The hegemony of the Greek political elite…

Source: Various/Brewin Dolphin
That hegemony now looks to be over.  Polls, as you would expect, now show that many voters don’t know who to vote for. They also show the fragmentation of the Greek vote with votes switching to fringe or new parties.

The fragmentation of the Greek vote…

Source: Various/Brewin Dolphin

Greece has been through extreme hardship, but its outlook remains extremely poor. The only prescription being offered is extreme austerity, for an extreme duration, with extremely low chances of success.  The human condition therefore prompts people to vote passionately for change on the “it can’t be worse than this” basis, without necessarily thinking about what they are voting for.

So at the forthcoming elections, which coincide, next Sunday, with the second round of the French presidential elections, no party is close to getting 50% of the vote.

Fortunately the Greek system of “reinforced proportional representation” guards against this by allocating 50 extra seats to the largest party – hoorah!  Even so a party ought to have to get 39% of the vote in order to win an artificial majority current front-runners New Democracy have only polled as high as 23% in recent weeks – oh dear!

The projected result therefore looks like New Democracy winning 100-110 seats with an approximate split for the rest as follows.

The projected results of the Greek 2012 election (huge margin for error)…

Source: Brewin Dolphin/MARC/Pulse RC/Public Issue
If the votes fall as the polls suggest, the slimmest of centre right majorities (1-2 seats) can be created through the tenuous assertion that the Greens could be courted into government, but the biggest stumbling block would be the block of 30-ish seats which may be controlled by the Independent Greeks.  The group are former members of New Democracy who voted against the technocratic coalition government Lucas Papademos. They are tangibly anti-European believing that Greece has fallen victim to an “international conspiracy”.

It looks likely that the Greek people will, by Monday, have rejected Europe with a strong enough voice that makes any further austerity measures very difficult to pass. Only a week will tell whether the ballot boxes are kinder than the polls.

In terms of turnout, by the way, there are reasons for optimism as voting in Greece is mandatory. Although the punishment for non-compliance has never been administered – naturally.

Guy Foster
Head of Portfolio Strategy

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