While Greek surveys show the major opposition Coalition of the Radical Left (SYRIZA) on course to narrowly win the critical Jan. 25 elections, a model by the US investment house Goldman Sachs Group says Prime Minister Antonis Samaras still has a shot.
The analysis was done by London-based Goldman Sachs economist Lasse Holboell W. Nielsen, a former official in Denmark’s finance ministry who says that Samaras, as well as English Prime Minister David Cameron and Spain’s Mariano Rajoy also will probably do better than expected.
The reason is that each will benefit from recent declines in unemployment and inflation, according to Nielsen, although Samaras’ New Democracy Conservatives are running from 1.8-3.4 percent behind SYRIZA according to Greek media surveys.
Studying the relationship between economic developments and incumbents’ re-election prospects, Nielsen found the greatest impact is from how voters view their economy, which Samaras said is on the edge of recovery.
Improving wages, slowing inflation and declining unemployment all bolster an existing government’s chances, although Greeks have had pay cuts and record unemployment.
By contrast, he found little evidence that fiscal profligacy helps and that while overhauling labor markets may hurt prospects for a fresh term in office it does so only minimally.
The good news for incumbents as recessions become a memory is that “on average, economic conditions seem to suggest a slightly higher-than-normal government re-election probability across European elections this year,” Nielsen wrote in a report, the Bloomberg news agency said.
His model, based on votes in developed economies during the past 25 years, suggests average economic conditions point to a 43 percent probability of governments being re-elected but 58 percent in Denmark, Finland, Greece, Portugal, Spain and Britain.