2012-05-04

Sunday elections: France and Greece

No surprises in France:
Hollande on track to win French poll
Sarkozy's chances fade two days before French runoff

Implications for the euro, but these are somewhat priced in. Greece, on the other hand, could be volatile. Greece is set to elect a fragmented parliament where very minor parties are crucial to forming a majority government. Since social mood is negative, this ruling coalition will be as popular as almost every other ruling government in the world, which is to say not. Popularity will fall and the fringe party will bail on the coalition, new elections will be held.

Here is WSJ coverage:
Greek Elections Seen Leading to Instability
Angry Voters Are Set to Punish Main Parties, Leading to New Polls Within Months and Threatening Bailout Package
New Democracy and Pasok typically dominate Parliament, and take turns governing. But on Sunday they will be lucky to reach a majority of the 300 seats in Parliament between them, thanks to booming support for protest parties, ranging from Marxist-Leninists to neo-Nazis.

With 10 parties polling above the 3% threshold for winning seats, Greeks are likely to elect the most fragmented Parliament since the restoration of democracy and fall of Greece's military junta in 1974.

"We are probably going to wind up with a New Democracy-Pasok coalition if they get the seats, which they might not," says David Lea, an analyst at Control Risks, an independent risk-consulting firm. "Either way, another round of elections before year-end is entirely possible."
The prediction is that new elections are held within the year, which means this government would only last about 4 to 5 months at best.

Here is WaPo:
Ahead of Greek election, fringe parties find support
The two mainstream parties, which have traded power since the fall of Greece’s dictatorship nearly 40 years ago, now pull in about 40 percent of support combined, down from 77 percent in the last election in 2009. Taking their place are parties on the left and right that oppose the bailout and Greece’s use of the shared euro currency.

The likeliest outcome of the election is an alliance between the two main pro-bailout parties, the Socialists and the business-friendly New Democrats, analysts say. But that is roughly akin to the Democrats and Republicans pulling 40 percent of the vote and then expecting them to govern together in lockstep to guide the country out of the Great Depression. Few Greeks have high expectations.
Both articles have lots of negative words such as destruction.

Polls have the two pro-bailout parties at 38% to 40% combined. I would bet the under; the surprise will be in favor of fringe parties.

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