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What JP Morgan Predicts for The Greek Elections

On May 21, Greece has parliamentary elections. According to a law passed by the previous leftist SYRIZA government in 2016, these parliamentary elections will be held with an almost entirely proportional system (with a 3% threshold for entering Parliament).

Recent opinion polls show that the current center-right ND (35%) is ahead of the left-wing and populist SYRIZA (29%), with a steady margin of 6 to 6.5 percentage points, with the center-left KINAL gathering approx. 10.5% and the far-left KKE 6.5%. Two more populist parties, the anti-European and left-wing Mera25 and the right-wing Hellenic Solution , which gather around 4.5% each, could enter parliament.

As a result of the electoral law, no party or coalition of parties appears to be able to secure a majority of seats. In theory, a far-left coalition led by SYRIZA, with KINAL as a junior partner and one or more additional left-wing parties, can win a minority of seats . However, at this point, this appears to be a remote risk. On the one hand, KINAL has steadfastly rejected any prospect of an agreement with SYRIZA, and any attempt to do so poses risks for the latter and its leadership as executives are likely to leave.

However, since the KKE has consistently refused to participate in any coalition government for the past 30 years, its stance appears much more negative. As for MeRA25, its strong Euroscepticism will certainly prevent it from being a good partner.

The above shows that we may be led to second elections on July 2nd . According to a law passed by the current ND government in 2020, this second election will be held based on a revised electoral law that provides a majority premium to the party with the most votes. A vote share of 38% should be enough to reach the threshold of 151 MPs.

Recent opinion polls show that the ND is already a few percentage points away from the required majority in these second elections. This would present two options : a one-party ND government, albeit with a potentially slim majority, or a government in which the ND would act as the key partner in a coalition with KINAL .

Given the high level of polarization in the electorate and the various incidents that have tarnished the ND’s reputation, it is too early to form firm opinions about a runoff. In fact, the validity of even the most recent polls is widely contested .

“In essence, we believe that after the May 21 election, it will not be long before it becomes clear whether a second election is necessary once the initial uncertainty subsides. If this happens, the ND will maintain a dominant role in the new government and will remain largely consistent with the current government. Although the ND may need to negotiate a coalition with KINAL, such an alliance is unlikely to significantly affect political goals, especially those related to ambitious reforms and major public spending programs facilitated by the EU Recovery Fund, which represents a significant share of the country’s GDP for the next five years. While there could be some adjustments to capital gains taxation, we do not expect significant changes to the overall policy agenda,” explains the American bank.Follow Euro2day.gr on Google News!Follow the developments with the Euro2day.gr validity signatureFOLLOW USFollow the Euro2day.gr page on Linkedin

“Consequently, our forecast for a resilient and sustainable growth of the Greek economy remains unchanged. After the significant decline of 8.1% year-on-year in 2020 due to the pandemic, the Greek economy has shown resilience by recovering by 8.1% in 2021 and is forecast to advance by an additional 6.1% in 2022. For the year 2023 we foresee continued robust expansion of around 2.5% on an annual basis. At the same time, the substantial expansion of the economy, reinforced by the rise in inflation, causes a significant reduction in the excessive amount of public debt, decreasing by 23.3 percentage points by the year 2022, to reach 171.3%”, underlines the bank.

Source: Euro2Day