Greece: A Decisive Win

Published on September 21, 2015

For all the press and pre-election drama over poll releases showing Greece’s opposition New Democracy party in a dead heat, and with the potential to upset Alexis Tispras’ Syriza party in yesterday’s elections, Tsipras not just pulled off a victory, as we predicted regardless of the polls, but indeed crushed the opposition. And for all the half-hearted attempts from analysts even now still to find a contrarian commentary on the results – the victory was clear, decisive, and at least in the near term, will be positive for Greek markets (See SGH 9/15/15, “Greece: A Surprising Bailout Proposal”).

Tsipras, while losing a handful of seats, has emerged far stronger than he was going into the election. On paper, his party dropped marginally from controlling 149 to 145 of the  300 seats in parliament, and his Independent Greek ANEL allies likewise slipped from 13 to 10 seats (the polling actually had them possibly missing the 3% threshold in parliament altogether), so the coalition has dropped from 162 to 155.

But the “new” Syriza is now cleansed of the 25-30 (and some thought at times up to 50)  Left Platform and sympathetic rebel members that  had constantly threatened to hold Tsipras hostage, which is to say that 155 is a much more solid number than the 162 ever was in allowing Tsipras the freedom to legislate.

Indeed this is exactly why for all the handwringing over “political risk” we long maintained that Tsipras would be forcing his country into elections only from a position of strength, and ND for their part despite what appeared for a moment to be a glimpse of a comeback never wanted these elections to begin with – at least not at this time.

An alliance with Potami or PASOK could have resulted in theory in a more moderate coalition than a return to the old coalition with the ANEL, but the formation of such a government would have presented challenges of its own, and potentially delayed the timetable of the aid program for Greece. Indeed you will recall that in an irony of all ironies, for all the bad blood spilled this year in the contentious program negotiations between Athens and the EU, for pragmatic reasons at least EU officials we wrote were privately indicating they would be more than happy to see a continuation of the present regime – sans the Left Platform.

What this means on a concrete level is first the politically controversial legislation over farmers’ taxes and liberalization of the pharmacy sector that was punted until after the elections will now pass easily and with little fanfare. Greece is then highly likely to receive the 3 billion Euros left in the first tranche, and will be on path to begin the first review on time.

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