This is why Grexit fears might be overdone | FT Alphaville

This is why Grexit fears might be overdone

We pointed out on Friday that a poll suggested Greeks were far from wanting out of the eurozone and would actually return to New Democracy in adequate numbers for a pro-bailout coalition to be formed. From Reuters:

The poll, the first conducted since talks to form a government collapsed and a new election was called for June 17, showed the conservative New Democracy party in first place, several points ahead of the radical leftist SYRIZA which has pledged to tear up the bailout.

EU leaders say that without the bailout, Greece would be headed for certain bankruptcy and ejection from the common currency, which would sow financial destruction across the continent. The prospect SYRIZA would win the election has sent the euro and markets across the continent plummeting this week.

The poll predicted New Democracy would win 26.1 percent of the vote compared to 23.7 percent for SYRIZA.

Crucially, it showed that along with the Socialist PASOK party, New Democracy would have enough seats to form a pro-bailout government, which it failed to win in an election on May 6, forcing a new vote and prompting a political crisis that has put the future of the euro in doubt.

Polls last week had showed SYRIZA well in front, with anti-bailout voters rallying behind its charismatic 37-year-old leader Alexis Tsipras. First place comes with a bonus of 50 extra seats in the 300-seat parliament, so even a tiny edge would be pivotal in determining who forms the next government.

Okay, so it goes on to show this is not a done deal:

The election is still a month away, and Greek voters have been fickle. Experts warned against drawing any strong conclusions from a single poll. Nevertheless, a trend that had shown SYRIZA surging ahead appears to have turned.

Regardless, however, it does seem an easy argument to make that faced with its platform that would probably lead to some kind of Grexit, quite a few Greek voters — who mostly want to remain in the eurozone — might be returning to the more centrist parties in next month’s election.

We’re pointing it out here again because we’re wondering if this point has been missed, like The Big Picture’s Kiron Sarkar argues:

Early days, but I for one believe that the trend away from Syriza will continue. Greeks, by an overwhelming majority (between 75% to 80%) want to remain in the Euro, as they realise that the reintroduction of the Drachma will result in an effective devaluation of at least 50%, by all accounts. The resultant hardship (the need to close the current account deficit to zero immediately) will make the current austerity plans seems like a mild dose of influenza, compared with the pneumonia that will follow an Euro exit. Yes the EZ will be negatively impacted, but the Greeks will make up their minds, based on the likely impact on themselves. This suggests to me that voters will swing away from Syriza and to New Democracy, in particular.

Getting a pro-bailout government in power on its own doesn’t change the bleak prospects for growth in the country struggling to meet its austerity targets. But the the warnings, on the one hand, that next month’s election will be effectively a referendum on Greece’s eurozone membership, could work in favour of New Democracy and/or PASOK, together with hints out of the weekend G8 meeting that Germany is becoming ever more isolated with its pro-austerity agenda.

Of course, that last point is still very much up in the air and is set to play out as a very messy game of chicken, as Joseph explains.

Related links:
Everybody chill – Grexit is not really imminent – FT
When PSI is futile – FT Alphaville