Previewing The First Of Many Greek Elections

Tyler Durden's picture

This weekend the Greeks will go to the polls - and with support for the two main parties (New Democracy - center-right; and PASOK - socialist) at historical lows (and the share of protest and extremist votes at historical highs) - is Greece about to become Belgium. This is likely exactly what the bankers want - a relatively ungoverned nation to pilfer - but as the WSJ reports, against a backdrop of economic crisis, a 'failed' election is expected to usher in such political instability that officials from the country's major parties are planning for another possible election within months. Can they break Belgium's record-breaking run of not having an official government or will the Greeks transform their economy with Greek Fries, Greek Beer, and Greek Chocolate? At the moment, New Democracy is widely expected to win the elections, without however securing the majority in parliament and even in the case of a coalition with PASOK the two parties would not have a majority in parliament. The problem, of course, is that many of the extreme-left and extreme-right minority parties (who are likely to get seats) advocate the renegotiation of agreements with official sector creditors, a rejection of austerity measures, or even leaving the euro altogether. Credit Suisse provides a succinct preview of the Greek elections and three scenarios (bad, badder, baddest) that the post-election EU/IMF-dependent nation faces.

From UBS:

Both main parties have campaigned on the idea that they will renegotiate the Memorandum of Understanding (MoU) with the IMF. In our view, that suggests a degree of liberty they do not have; we think there is little, if any, appetite at the Fund or at the EC to renegotiate the agreement. Rather, the new government’s task will be daunting: €3bn of spending cuts to implement immediately and an additional €12bn to be detailed for 2013-14. Risks have risen around Greece’s ability to implement austerity measures, against a backdrop of increasingly frustrated and impatient official sector lenders.

Credit Suisse: Preview of the Greek elections

Less than a week before the Greek general election (May 6) the outcome remains uncertain. Support for the two main parties – New Democracy and PASOK – is at historical lows (35%-40% against 78% in the 2009 election), with the share of the protest vote and the undecided remaining very high. The latest polls published more than a week ago (due to a restriction for publication of opinion polls two weeks before the elections), suggest that no single party will be in a position to get a majority in parliament, so a coalition government would be likely – not something very common in the Greek political scene.


Greek political system – how does it work?

 The Greek parliament has 300 members, elected by a system of “reinforced proportionality”. “Reinforced” because the party that has the most votes is awarded 50 additional seats (irrespective of its share of the votes) and for a party to be represented in parliament, it has to get at least 3% of the votes. “Proportional”, because the remaining 250 seats are allocated proportionally to those parties that meet the 3% threshold. Based on the above, for a party to secure a majority of the seats (151 MPs), without having to rely on a number of parties not meeting the 3% threshold, needs to get at least 40.5% of the votes (i.e. 40.5% of 250 = 101 seats, plus the 50-seat majority premium). In practice, this percentage is lower, since it is unlikely for all parties participating in the election to make it into parliament.

Main political parties

Exhibit 3 provides an overview of the main political parties in Greece and their stance towards euro membership and the EU/IMF programme.

Where things stand at the moment?

At the moment, New Democracy is widely expected to win the elections, without however securing the majority in parliament, despite the 50-seat premium. If a coalition government was decided upon, the PASOK party would be the most likely candidate, given their common stance on the EU/IMF programme and their coexistence in the latest interim government. However, some opinion polls, suggest that even in such a scenario, the two parties would not be in a position to have a majority in parliament, or have a weak majority at best. Adding to the complexity, the leader of the New Democracy party, Antonis Samaras, is strongly against the idea of a coalition government with PASOK. If an additional member for the coalition was to be looked for, Democratic Alliance – a liberal party in favour of the reforms – would be a likely candidate, however it is unclear whether it will reach the 3% threshold needed to get into parliament. From the remaining parties, the Democratic Left – a pro-European party in favour of some reforms – would be a possible candidate, however its rejection of the EU/IMF programme as it is and its refusal to participate in a New Democracy-PASOK coalition complicates the situation.


The protest vote in this election is high, with up to ten parties getting into parliament – five of which for the first time – and ranging from far-right to far-left. Also the number of undecided at 15-20% remains at high levels and would largely determine the outcome of the election. Political analysts suggest, that as the election date is approaching, the New Democracy and the PASOK party will manage to get back part of their traditional voters and hence their support would be slightly higher than what the latest opinion polls imply.


It is worth noting that no coalition of parties without the participation of New Democracy seems likely, mainly due to the 50-seat premium that the New Democracy party will get and due to the fact that the rest of the votes are split among a collection of parties with strong ideological differences, ranging from far-right to far-left.

Timeline after the elections

The election result will be known late at night on Sunday 6 May. Following that, if no party has the majority of the votes (which is the most likely scenario), the president will ask the leader of the first party in votes to try to form a government (e.g. through a coalition) that enjoys the confidence of the parliament. If this fails or the party withdraws from its right, then the second party is asked to do the same and so on. The process is repeated for the three largest parties and each one has a three-day deadline. If these attempts fail, the president calls the parliamentary leaders of the parties on a last attempt to form a broad coalition government. If that is also unsuccessful an interim government is formed that would lead the country to a new election within a month.


Post-election scenarios Given that it is unlikely that after the elections a single party will have a clear majority, there are several scenarios that could play out. In the list below, we highlight those scenarios that in our view are the most likely ones.

  • Scenario 1: New Democracy – PASOK coalition. This is the most likely scenario, in our view. Despite their pre-election announcements – in light of the international pressure and the lack of other alternatives – the two parties are likely to form a coalition government. Based on the poll numbers – if nothing fundamentally changes – this would be a rather weak coalition. It is expected to implement the EU/IMF programme, however frictions between the coalition members are likely. It is also expected to face strong opposition by the anti-bailout parties, especially if it does not have the majority of the votes (lack of strong popular mandate). It would be a rather fragile government, whose stability would be largely determined from the economic outlook and the progress of the reforms, in our view.
  • Scenario 2: Broader coalition with the participation of other parties as well. Either due to a lack of parliamentary majority of the above coalition or the need to enlarge the popular base, a smaller party might be asked to join the coalition, e.g. the Democratic Left or the Democratic Alliance. This will allow for a stronger parliamentary majority, but the dynamics are not as straightforward. Taking into consideration the different programme goals of the members of the coalition – especially in the case of the Democratic Left – the government might not be flexible enough to implement the agreed reforms and a lot of the measures might have to be watered down, in order to be passed in parliament.
  • Scenario 3: New elections. If there is unwillingness from the New Democracy party to form a coalition government or attempts to do so fail, then new elections will follow suit. This outcome would be disruptive, at least in the short term, and questions regarding the implementation of the EU/IMF programme and Greece’s existence in the euro will emerge.

In the new election it is possible that, in fear of an ungoverned country, part of the protest vote will be shifted towards the main parties, resulting in a stronger government/coalition, that would be in a position to implement its mandate. However, if this is not the case, the risk of a disruptive development will materially increase.

As UBS notes, "We believe that the Greek situation is far from resolved and that a further restructuring of the debt is quite likely."

What if Greece does not deliver? We think that there is a clear risk that the IMF simply refuses to make the next payment. In that case it is probable that the EU would follow suit. However, it is unlikely in our view that payments would stop altogether; rather, they might be postponed until Greece fulfills its obligations

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Stylianos Kyriacou's picture

You couldn't be more correct my friend 

Sandmann's picture

Belgium doesn't have a Government because France doesn't want it to have one. If it did it would break up the country and France would get the poor Francophones and the Dutch would protect the affluent Flemish population. The simple fact is the EU is in Brussels because France wanted a Francophone EU - it is why Luxembourg and Belgium are so predominant - but with the Flemish population of Belgium wanting independence France could be faced with acquiring yet more poor regions to Northern France.

Greece is a different matter because it is a Mediterranean nation like Turkey and Lebanon and has distinctly different - perhaps better possibilities. Greece could flourish if it had a different kind of politics

GeneMarchbanks's picture

ZHs very own Banking Guy from Brussels says otherwise:

As for the Greek situation, it is as Durden says: apathy quickly to be taken advantage of by the banking interests.


I wonder if Greek elections are as pointless as ours here is the U.S.?

Stylianos Kyriacou's picture

usually yes but now i guess not :)

GeneMarchbanks's picture

You Greek or Romanian, can't figure it out?

Stylianos Kyriacou's picture

Well, am an Engineer so i've learned to judge things based only on their results. We will know soon enough  though :)!  

p.s. for the moment it seems that the only correct way is the Iceland way!

Manthong's picture

Interesting to watch and may provide a preview of the real action on the other side of the Med.

carbonmutant's picture

If at first you don't succeed...

Actually this should lead to a Broader coalition of parties...

Which is a "Good Thing"

KCMLO's picture

Anyone else appreciating the irony that Greece may be the key to the rebirth of actual Democracy?  Not saying I think it will happen... but...

Stylianos Kyriacou's picture

As a friend said before.... Pirate Party!!! Since nowadays we have the technology to communicate our opinion on every subject way not use it to take the actual decisions as well?

Zero Govt's picture

Is there a box option for voting for 'No Govt' in the birthplace of democracy?

Given whichever f'ing Govt you vote for goes bankrupt every 14 years in Greece (and every other country, what a strange coincidence?) and wrecks the economy is there any chance of giving freedom a chance ?

Nope, but there is a way..

Stop Paying Your Taxes ...don't fund/feed the nation wrecking parasites

Sandmann's picture

the birthplace of democracy


And what a democracy it was in Athens !!!

in the 8th century, rich farmers began exporting their goods, olive oil and wine. Such cash crops required an expensive initial investment. The poorer farmer was more limited in choice of crop, but he still could have continued to eke out a living for a long time, if only he had either rotated his crops or let his fields lie fallow.

When land was mortgaged, stone markers (hektemoroi) were placed on the land to show the amount of debt. During the 7th century, these markers proliferated. The poorer, wheat farmers lost their land. Laborers were free men who paid out 1/6th of all they produced. In the years of poor harvests, this wasn't enough to survive. To feed themselves and their families, laborers put up their bodies as collateral to borrow from their employers. Exorbitant interest plus living on less than five sixths of what was produced made it impossible to repay loans. With default, the collateral was called on. Free men were being sold into slavery. The situation was intolerable. At the point at which a tyrant or revolt seemed likely, the Athenians appointed Solon to mediate.

In his reform measures, Solon pleased neither the revolutionaries who wanted the land redistributed nor the landowners who wanted to keep all their property intact.

"Though Phanias the Lesbian affirms, that Solon, to save his country, put a trick upon both parties, and privately promised the poor a division of the lands, and the rich, security for their debts."
-Plutarch Life of Solon

Instead, Solon instituted the seisachtheia by which he didn't cancel all debts, but did:

  • cancel all pledges where a man's freedom had been given as guarantee,
  • freed all debtors from bondage,
  • made it illegal to enslave debtors, and
  • put a limit on the amount of land an individual could own.

Solon also repealed all of Draco's laws, except those on homicide, because the punishment for all was death. Solon didn't deprive the nobles of their power, since he left them to fill the offices of the magistrates. He also created an Areopagus, according to Plutarch, to consist of those, like himself, who had been yearly archons. This aristocratic Areopagus was to serve as watchdog of the laws and to look over matters before they were presented to the assembly of the people. But Solon helped the disenfranchised by creating a council of 400. He combined 100 citizens from each of the 4 tribes. He also divided the people into classes based on wealth/property, and he instituted laws allowing any citizen to prosecute someone else who physically harmed him.

Plutarch records Solon's own words about his actions:

"The mortgage-stones that covered her, by me Removed, -- the land that was a slave is free;
that some who had been seized for their debts he had brought back from other countries, where
-- so far their lot to roam, They had forgot the language of their home;
and some he had set at liberty, --
Who here in shameful servitude were held."

carbonmutant's picture

It must be gettin' serious:

Fitch says that if Greece leaves the eurozone then all European sovereigns will be placed on ratings watch negative.

CvlDobd's picture

Anyone see Gartman quoting Biggs today and telling peeps to "learn from a master."?

And in that missive Biggs quotes Buffett who mentions Jack Bogle.

Oh man we are so fucked if these are the "visionaries" driving markets.

Holllleeeeeee Sheeeettttttt!!!!!!

lolmao500's picture

You might see extremists groups take over... would be interesting to watch if those parties would tell the EU to shove their crap up their ass.

ddemet's picture

Greece had a minimal primary deficit in 12Q1 (300M eur) so if the IMF stops giving Greece bailout money then Greece will not be able to repay creditors who, after the PSI, are mainly the IMF and ECB. Anybody gets the irony?

SpeakerFTD's picture

Hans: The following people are to be released from their captors: In Northern Ireland, the seven members of the New Provo Front. In Canada, the five imprisoned leaders of Liberte de Quebec. In Greece, the nine members of the Golden Dawn movement...
Karl: [mouthing silently] Golden Dawn?
Hans: [covers the radio] I read about them in Time magazine.

q99x2's picture

Guess: they aren't allowed to have guns there.

Sandmann's picture

Go look at a map and see where Greece is located - then think about all those guns Clinton let the Iranians fly into Kosovo and then look what adjoins Kosovo.

No they won't have weapons in Greece just as they don't have weapons in Mexico unless the US Government supplies them. Drugs Gangs don't use guns they use love bombs as in Mexico and Colombia.......and there are no drugs in Kosovo or Albania because that would be naughty.

penexpers's picture

It seems history does repeat itself: a disenfranchised, desperate, vengeful and irate population supporting a far-right political party promising immediate results.