Syriza Trounces New Democracy; Greeks Stop Paying Taxes; Run on Greek Banks Escalates; Get Out!

Townhall.com ^ | January 26, 2015 | Mike Shedlock

[Kaslin]

As late as yesterday I read numerous mainstream media reports that Syriza would win by three to five percent and would need to form an unstable coalition to rule.

In contrast, here was my January 19 prediction (and rationale): Expect a Blowout Win by Syriza in Greece.

Syriza Trounces New Democracy

The final votes are not counted, but exit polls show a blowout, with incumbent party New Democracy going down in flames.

The Wall Street Journal reports Greece’s Radical Leftist Syriza Party Poised to Win Election, Exit Polls Say.

Syriza appeared set to win between 35.5% and 39.5% of the vote, trouncing the incumbent New Democracy party, which managed to secure just 23% to 27% of the vote, according to the exit polls whose results were issued immediately after voting booths closed.

If Syriza is able to secure more than 150 seats on its own—which the exit polls show is possible—it won’t need coalition partners and will have a freer hand in implementing its platform—something that could lead to ruptures with Greece’s creditors.

The polls also showed that voters backed a handful of smaller parties—ranging from the extreme-right Golden Dawn party to the centrist To Potami party—making it unclear whether Syriza would win an absolute majority in Greece’s 300-seat legislature. According to the polls, Syriza was projected to secure between 146 to 158 seats, depending on the final outcome.

Greece Exit Polls

image: http://1.bp.blogspot.com/-wdUADJqt2uw/VMU_p7mIdfI/AAAAAAAAcH0/oEjLoDyS2LU/s400/Greece%2BPolls.png

Note the double-digit (or near double-digit) trouncing of New Democracy leader and current prime minister Antonis Samaras.

Here's an interesting quote from the Journal.

“Europe is self-destructing,” said Polyxeni Konstantinou, a 56-year-old public-sector worker voting in central Athens. “I voted for Syriza because I hope that it will help change the tragic circumstances that now govern Europe. Will Syriza be able to achieve everything it says? Probably not. But whatever it does achieve, then that will be good for Europe.”

Greeks Stop Paying Taxes

Late last week the Financial Times reported Greeks Stop Paying Taxes in Expectation of Syriza Poll Victory.

A reluctance to pay taxes was much criticised by Greece’s creditors as one reason why the country needed a big international bailout. Now many Greeks are again avoiding the taxman as they bet the radical left Syriza party will quickly loosen fiscal policy if it comes to power in Sunday’s general election.

A finance ministry official confirmed on Friday that state revenues had collapsed this month. “It’s normal for the tax take to decline during an election campaign but this time it’s more noticeable,” the official said, avoiding any specific figures on the projected shortfall.

However, two private sector economists forecast the shortfall could exceed €1.5bn, or more than 40 per cent of projected revenues for January.

Angeliki Mousouri, a dentist who is paying off more than €20,000 of tax arrears, said she missed a monthly instalment due in December.

“I don’t expect to be penalised,” she said. “If Syriza is the government they will show leniency to cash-strapped taxpayers.”

Syriza is set to win the election even though it may not achieve an outright majority, according to opinion polls. Three polls published on Friday showed Syriza leading the centre-right New Democracy party of Antonis Samaras, the prime minister, by 4-5 percentage points.

As late as last Friday polls expected New Democracy would lose but not get trounced.

Voting by Feet (Bank Accounts)

ZeroHedge reports Greek Deposit Outflows Soar In Run-Up To Syriza Victory.

The monthly Bank of Greece balance sheet data for the month of December revealed a significant increase in Greek bank ECB borrowing which rose by €11bn in December to €57bn (including €1bn of Emergency Liquidity Assistance). This is more than the €3bn deposit outflow reported for December. It is thus likely that Greek banks had to borrow even more in December to offset not only their lost deposits but likely reduced access to private repo markets, as it happened before during Greek crisis.

We argued in recent weeks that one indirect way of gauging the pace of bank deposit outflows in Greece on a high frequency basis is to look at the inflows into offshore money market funds such as those based in Luxemburg. Purchases of offshore money funds, one way for Greeks to invest their withdrawn bank deposits, spiked to very high levels this week. These purchases totaled €206m during Mon-Thu this week vs. €91m over the previous week (between Jan 9th and Jan 16th), €54m in the week before (between Jan 2nd and Jan 9th), and €107m for December as a whole (€24m per week between Dec 1st and Jan 2nd).

So there is a sharp acceleration this week. If the €3bn deposit outflow reported by the press for the month of December is accurate and these offshore money market purchases are a good proxy for deposit flows, we should have seen deposit outflows of around €4bn in the first two weeks of January and a large €8bn deposit outflow this week alone.

The fear factor, New Democracy’s biggest weapon, has thus risen sharply this week [and clearly backfired].

The above paragraphs not by ZeroHedge but rather from JPMorgan (no link given).

Run on Greek Banks Will Escalate

I repeat my January 9 warning: Another Run on Greek Banks Begins; Get Out While You Still Can; Buy Gold.

Get Out!

There is no reason to hold money in Greek banks, and every reason not to (even if there is talk of ECB guarantees). At this point, the "Juncker Rule" applies (they will lie when it's serious).

It's serious. Get out!

Get Out Where?

By get out, I do not mean to another European bank. If I were a Greek citizen, I would personally worry that any euro-denominated bank (not just Greek banks) would confiscate my money.

For short-term needs, consider US dollars or euros, in hand, not in Greek bank safe deposit boxes.

For mid- to long-term needs, US treasuries (or US treasury ETFs), German bonds (or German bond funds), and gold look attractive, especially gold.

[spokeshave]

This whole problem with Greece came to light when some government employee took a look at a satellite photo of Athens and saw all the swimming pools in the backyards. Greece had a tax on building swimming pools, and no one was paying it. That started the whole house of cards to start falling.

Also...when building an apartment building in Athens (and anywhere else in Greece) ...with a permit for 4 floors....the elevator mechanism needs a shelter on the roof....the technician needs a wash room....and bathroom.....and a store room for spare parts....soon the 5th floor is a lux penthouse ....and of course not reported to the tax guts.