Anthony Peters, SwissInvest Strategist
If we look at the Hellenic political landscape, we see something as confusing and irreconcilable as its government finances. Apart from the fairly normal hues of political colour from the extreme left to the fascist right, each one seems to sub-divide into europhile and europhobic groups. The last parliamentary elections saw the two dominant parties emerge a combined 77.5% of the popular vote and Pasok with 160 of the 300 seats – through defections and bye-elections, this has been whittled down to 129 – and with the New Democrats winning 91 seats, now just 72.
Does the euro benefit or suffer if the weakest member of the eurozone exits the fold? Knowing the way markets generally react, I suspect that it will first sell off on fears of uncertainty, only to then rally on hopes of a more stable – or perhaps less unstable – eurozone.
According to the most recent opinion polls, Pasok is predicted to win something between 14% and 19% of the popular vote – that was 43.9% in 2009. The New Democrats should fare better with a residue of something in the range of 21.5-25.5% after capturing 33.5% in 2009.
Forecasting seat numbers is more difficult as any party which stands needs to poll 3% of the total national vote in order to be included in the distribution of seats. A number of smaller parties might drop either side of the hurdle, thus affecting the final outcome although it is pretty clear that, miracles excluded, the two major parties will not be in a position for form a grand coalition between them. It will be the likes of former foreign minister Dora Bakoyannis’ Democratic Alliance and other new parties which have sprung from the dissidents which will make the difference.
However, these new groupings are in the main the spawn of resistance against the imposed austerity and it looks likely that, at best, Greece will fall into political grid-lock, at worst become utterly ungovernable and eventually borrow the money to buy the Troika a one-way air ticket to Frankfurt.
The past few months have brought remarkably little rhetoric out of Brussels with respect to the Greek situation as the major powers have quite evidently been gently back-pedalling on their insistence that without Greece there is no euro. Nevertheless, should the outcome of Sunday’s elections give the anti-lobby the upper hand, then a bout of euro currency volatility is to be expected.
However, the question is the following: Does the euro benefit or suffer if the weakest member of the eurozone exits the fold? Knowing the way markets generally react, I suspect that it will first sell off on fears of uncertainty, only to then rally on hopes of a more stable – or perhaps less unstable – eurozone.
While talking elections, the Tories took a massive pasting in yesterday UK locals but I have no need to switch on the wireless or the television to hear the Labour spokespeople crow that the outcome is a vindication of Ed Milliboy’s leadership, of core values, of local concerns and a rejection of an incompetent government. The Tories will reply with the affirmation that every incumbent government loses local elections, that it is very disappointing but that there is nothing to worry about. Yes, yes, all the usual taurian faeces.
It’s terrifying how quickly a month goes by and it is US labor report day again. Forecasts are for an increase in the April non-farm payroll of 160k which is precisely the number needed to re-establish the growth trend in employment after the disappointment of the 120k figure reported for March.
The last claims number was pretty good, so it would appear that the result looks more likely to err to better rather than to the worse. However, it should never be forgotten that employment is the mother and father of lagging indicators and the sort of caution which the FOMC has been calling for with respect to the sustainability of the economic growth trajectory will not be reflected here. Anyhow, irrespective of how cautious the Fed might be, both business and consumer confidence are creeping higher and we are after all in an election year. The risks to the US are to be found in 2013, not in 2012.
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Alas, it is that time of the week again. All that remains is for me to wish you and yours a happy and peaceful week-end. May you be lucky enough to live somewhere where, if you come back to the office next week looking brown, it is tan and not rust.