ECONOMIC & POLITICAL NEWSLETTER:

Focus on the Eurozone

7 June 2012

www.ipredict.co.nz

https://twitter.com/ipredictnz

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Key Points:

• Greece to stay centre-right but Europe shifting centre-left

• Eurozone Fiscal Compact won’t be ratified and Euro to unravel by 2014

• Obama to be re-elected in US

• Australian interest rates may be cut again next month

• Abbott safe as Coalition leader and expected to win next Australian election

• New Zealand growth prospects edge up since Budget, but National and Labour in dead heat for 2014

Greek Election

Votes in Greece are likely to back the centre-right sufficiently to allow New Democracy leader Antonis Samaras to form a government after next weekend’s legislative election, according to the 6900 registered traders on New Zealand’s online prediction market, iPredict.

It is not obvious where New Democracy’s parliamentary majority will come from, however. Traders are currently picking New Democracy to win 97 of the seats in Greece’s 300-strong parliament, the centre-right Independent Greeks 27 seats and the far-right Golden Dawn 17 seats. This suggests traders believe the centre-left Panhellenic Socialist Movement, forecast to win 36 seats, may choose to back New Democracy over the main opposition force, the Coalition of the Radical Left, picked to win 73 seats.

Eurozone

The forecast win for the Greek right appears to have driven down expectations that Greece or any other country will leave the Eurozone in 2012. There is now just a 36% probability Greece will leave the Euro in 2012 and a 40% probability that any country will.

Longer-term prospects for the Euro are not as encouraging, however. There is just a 16% probability the Eurozone Fiscal Compact will be ratified as planned by the end of the year and a 65% probability at least one country will leave the Eurozone before 2014, with Greece most likely with a 62% probability of departure.

This may be connected to the general political trend in Europe being to the anti-austerity left, according to iPredict traders.

In French legislative elections this month, the Socialist Party is forecast to win 260 of the 577 seats in the National Assembly, likely to give it a majority with the Left Front, forecast to win 15 seats, the Greens, with a forecast 6 seats, and independents.

Early trading also suggests a Labour or Socialist prime minister after the next election in the Netherlands, and a win for the centre-left Social Democrats in Germany next year.

Outside the Eurozone, the United Kingdom is also forecast to elect a Labour-led government in 2015

Stocks are also now available for trading on the next election results in Italy and Spain

Other International Elections

Elsewhere in the world, Mohamed Morsy of the Islamist but economically liberal Freedom and Justice Party is picked to win the Egyptian presidential election next weekend, Democratic President Barack Obama is expected to be re-elected in the United States in November, the centre-right Saenuri Party is picked to win the South Korean presidency in December, and the centre-right Liberal/National Coalition is strongly backed to win in Australia next year. Its leader, Tony Abbott, is expected to retain his position until election day. There is a 51% probability Australian interest rates will be cut again next month.

In New Zealand, where in recent months the centre-right National Party has been favoured to lead the next government after the 2014 election, it and the centre-left Labour Party are again locked in a dead heat, with both having 50% probability of leading the next government. National is expected to fall further in the next TVNZ and TV3 polls, although be up in the next Roy Morgan poll. New Zealand’s short-term growth prospects have edged up slightly since last month’s Budget and are now 0.52% for the September 2012 quarter, 0.51% for the December 2012 quarter, 0.41% for the March 2013 quarter and 0.26% for the June 2013 quarter.

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