Mish's Global Economic Trend Analysis

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SYRIZA Surges in Greek Polls, Would Win Election if Held Today; Message People Want to Hear; Contagion Guarantee Posted: 18 Jan 2014 11:35 AM PST Support for Prime Minister Antonis Samaras' New Democracy coalition has finally crumbled to pieces. For the year things had been close between New Democracy and opposition "Radical Left" party SYRIZA. Not anymore. The Greek Reporter notes SYRIZA Killing New Democracy, PASOK in Attica, a critical Athens region of Greece. A series of scandals, unresolved talks with the country's international lenders, and the escape of a terrorist seem to be taking their toll on Prime Minister Antonis Samaras' coalition government and his New Democracy Conservatives, who have fallen 7.7 percent points behind their rival, the Coalition of the Radical Left (SYRIZA) in the critical Attica region including Athens. SYRIZA, which opposes the austerity measures being imposed by the government, had been battling for the lead in surveys for a year with New Democracy, both sides barely one percent apart, but now has a lead of 24.6-16.9 percent in the poll taken by GPO for Newcast. That comes in the wake of a series of arrests involving a scandal at the failed state-owned Hellenic Postbank, the defense ministry, a publisher charged with failing to pay his taxes and as Samaras is trying to assert the country is poised to make a comeback. Voters aren't buying it. Despite the arrest and prosecution of its leaders on charges of running a criminal gang, the ultra-far right extremists of Golden Dawn remain a steadfast third with 11.1 percent, even though its leader, Nikos Michaloliakos and four other of his party's Members of Parliament are in jail awaiting trial. As bad as the results were for Samaras, it was worse for his partner, the PASOK Socialists who got 44 percent of the vote in 2009 when it won the elections. Under current leader Evangelos Venizelos, who gave Samaras his votes to join the coalition and was rewarded by being named Deputy Prime Minister/Foreign Minister, have fallen to 3 percent, the threshold needed to win seats in Parliament. PASOK is now dead last among the seven parties in the Parliament. The Communist party (KKE) is fourth with 4.9 percent, followed by the Independent Greeks at 4 percent, the Democratic Left (DIMAR) – a former partner in the coalition – at 3.1 percent and also in danger of disappearing as a party next, just ahead of PASOK. About 13 percent of voters are undecided and while the survey wasn't nationwide, it covers the most populous area and if the lead holds it would be difficult for New Democracy to catch up and stay in power in the 2016 elections – if the government lasts that long and snap elections aren't held. SYRIZA leader Alexis Tsipras, who opposes the austerity measures and said his party wouldn't repay the $325 billion in loans granted by the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) has predicted the Leftists will come to power. He has promised a return to Utopia by restoring pay, cutting taxes, returning pensions to their previous level and no public worker firings as demanded by the Troika. He didn't say how he would do it without the loans or if Greece continues to be locked out of the markets. Message People Want to Hear I have no love for leftists. And Tsipras' promise of restoring pay, cutting taxes, and no public worker firiings is of course ridiculous. Nonetheless, his message is what people want to hear. It's hard to say whether people truly believe in what he is saying or not. Mathematically, it's impossible to do what he says and maintain a current account surplus as well. Perhaps Tsipras himself even recognizes that. Regardless, the one thing I am reasonably sure of is Greece will not pay back $325 billion in loans granted by the Troika. I even support that policy. It would be better if it came with a realistic message to Greek citizens as to what that would mean. Short-term there would be more pain. But long-term it's the right ting to do, if accompanied by badly-needed reforms. Default Coming One Way or Another Whether done properly, or with promises that cannot be met, Greece is going to default on that debt. When that happens, German citizens will discover that Chancellor Angela Merkel's promise that German taxpayers won't be impacted is as hollow as most chocolate Easter bunnies. Calculating taxpayer responsibility percentages of various countries is simple enough. Eurozone Financial Stability Contribution Weights Country Guarantee Commitments (EUR) Millions Percentage Austria € 21,639.19 2.78% Belgium € 27,031.99 3.47% Cyprus € 1,525.68 0.20% Estonia € 1,994.86 0.26% Finland € 13,974.03 1.79% France € 158,487.53 20.32% Germany € 211,045.90 27.06% Greece € 21,897.74 2.81% Ireland € 12,378.15 1.59% Italy € 139,267.81 17.86% Luxembourg € 1,946.94 0.25% Malta € 704.33 0.09% Netherlands € 44,446.32 5.70% Portugal € 19,507.26 2.50% Slovakia € 7,727.57 0.99% Slovenia € 3,664.30 0.47% Spain € 92,543.56 11.87% Eurozone 17 € 779,783.14 100% The above table from European Financial Stability Facility Note that Greece is responsible for 2.81% of Greek defaults. How is that going to work? It doesn't. So take that percentage and spread it around according by revised weight. And what is Spain supposed to do with it's 12% of €325 billion of defaults? Contagion Guarantee Thank the economic illiterates at Troika for this setup. Greece could have defaulted in 2009 with perhaps a €40-50 billion mess to cleanup. In a foolish attempt to prevent contagion, the nannycrats turned a relatively small mess into major €325 billion problem, virtually assuring the contagion they set out to prevent. Expect to see much use of the word "contagion" in the coming months. Here is a question I asked in Prisoner's Dilemma Game in Greece; Contagion-Spread Eurozone Breakup More Likely Now; How will Greece NOT pay back €320 billion? So Angela Merkel, when are you going to admit this setup, and what are you going to do about it? Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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