Greek Election Looms With Samaras Racing to Catch Syriza

19/1/2015

By Eleni Chrepa

Greece enters the final week of campaigning for national elections with time running out for Prime Minister Antonis Samaras’s New Democracy to overtake Alexis Tsipras’s opposition Syriza party and hold to the path of economic reform.

Syriza led New Democracy by between 3.1 percentage points and 3.8 percentage points in separate polls published this weekend in Athens by Kapa Research, Metron Analysis and Rass.

“We will see a clear Syriza victory,” Aristides Hatzis, an associate professor of law and economics at the University of Athens, said in a telephone interview. Yet at those levels of support, 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,” Hatzis said.

Greece’s Jan. 25 election is about more than politics, with each side offering competing economic models to shape the country’s financial future after more than four years of existing on international loans. With an extension of Greece’s aid program due to expire at the end of February, the country will run out of cash by the end of June if it can’t reach an agreement with its creditors, two officials said last week.

Greek stocks rose on Monday, with the benchmark Athens Stock Exchange gaining 1 percent at 3:51 p.m. local time. Greek 10-year bond yields fell 1 basis point to 9.35 percent.

Greek Scenarios

“I don’t fear what will happen in the Greek elections,” European Union Economic Commissioner Pierre Moscovici said today in Brussels. “We are preparing for all kinds of scenarios in Greece.”

While Samaras says that he can seal the deal by the end of next month, his main opponent Tsipras said in an interview with Ethnos newspaper over the weekend that he can complete negotiations with the country’s creditors by this summer.

Syriza has only brought confrontation with European partners, Samaras said in a speech Sunday evening in his home city of Kalamata. Victory for New Democracy “will keep Greece within the euro area,” he said.

“Our entire policy has been based on having Greece as part of the euro area,” German Chancellor Angela Merkel said in a press conference in Berlin today, adding that “making an effort of your own on the one hand, solidarity on the other” are two things Germany is prepared to offer for Greece.
Aid Payment

Greece won’t get an outstanding aid payment of 7.2 billion euros ($8.3 billion) unless a review of the country’s progress in meeting the terms of its bailout is completed by Feb. 28, Finance Minister Gikas Hardouvelis said in an interview with Kathimerini newspaper’s Sunday edition.

Failure to agree on an extension of the rescue program which expires then would also mean the witholding of the aid tranche, he said. Greece would then have to return 11.4 billion euros from its bank recapitalization fund reserves and Greek lenders would have to rely on ELA liquidity, he said.

Less than a week remains for those arguments to translate into support for the ruling party. Backing for Syriza was between 31.2 percent and 28.3 percent in the weekend polls, compared to 24.7 percent to 28.1 percent for Samaras’s party. That represents a steady lead of about 3 points for Syriza and its platform of abandoning the austerity imposed in return for aid, raising public wages and pressing for debt relief.
Deposit Outflows

A Goldman Sachs model devised to forecast election results on the basis of economic performance suggests the election could be tighter. It shows Samaras has a better chance of re-election than suggested by opinion polls, London-based Goldman Sachs economist Lasse Holboell W. Nielsen, a former official in Denmark’s Finance Ministry, said. Jan. 16.

With the increased political uncertainty, Greece’s lenders are seeking to borrow from the nation’s central bank emergency line, a sign banks may be struggling to fund their activities amid an outflow of deposits. The outflow of bank deposits in December, which were down about 3 billion euros, continued into the start of January.

“I had warned that the government should have been left to complete its four-year term”, Samaras said in a Jan. 17 interview with Ant1 TV when asked about the phenomenon. Hardouvelis said the outflows can be reversed if political uncertainty recedes.

Greece’s outlook was revised to negative from stable by Fitch on Jan. 16 as a result of the unclear political outcome. Fitch said the uncertainty has raised the risks to Greece’s creditworthiness since official financing, and any potential reopening of market access, could be delayed for some months.

The threat of more deposit outflows this week “could work in favor of the government,” though “only to an extent,” according to Hatzis of the University of Athens. Either way, it won’t be enough to prevent a Syriza victory this coming Sunday, he said.

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