What Do Greek Polls and Weather Forecasts Have in Common ?

Having grown up in America, where polls and survey are viewed like the weather report, because they are hit or miss, and never right when you depend on them, I find it hard to believe that professional investors and traders are risking billions of dollars on polls in Greece of all places. A country that changes its mind more often then it changes its leadership. If memory services me right, isn’t this one of the countries that changed side multiple times during World War II.

What is sparking the rally is a bit of blind optimism with the focus upon weekend polls in Greece and to a lesser extent Ireland versus ignoring Spain’s potentially bigger and escalating troubles.  Six opinion polls were published in Greece this weekend, and the results were uniformly in support of the pro bail-out and pro-euro parties in such a manner as to remove the momentum of the far left Syriza party that had been previously leading in the polls.  Reuters reports that the conservative New Democracy party led in every poll by between a slim 0.5 percentage points to as much as 5.7 percentage points over the second place Syriza party that would default, repudiate the aid deal, and nationalize the banks.  The accompanying table summarizes the polls.  Two of them – the Pulse and Marc polls – argued that the two largest pro bail-out parties (New Democracy and Pasok) would get enough seats to form a coalition government with a majority of between 11 and 16 seats.  In Greece, the share of the vote does not readily translate into the share of seats because it is a mixed proportional representation electoral system.  Proportional representation exists for 250 seats – some of which operate with multi-seat constituencies – and then 50 more seats are awarded for the party or coalition that wins a plurality of the votes. 

One poll noted that 82% of Greeks wanted to keep the euro, and 54% should negotiate to alter the bail-out terms.  Another separate poll of Syriza’s young supporters said that what was far more important than any of this was to never have tzatziki sauce when out on a date. To what extent are the current Greek polls likely to prove accurate?  For that, we turn to what the polls were showing on May 5th just before the next day’s ill-fated vote. 

At that time, the polls were saying that the New Democracy Party was projected to win 20-26% of the vote, and the Pasok Party was supposed to win between 14-19% of the vote.  Instead, New Democracy won 18.9%, but Pasok slipped to third and garnered only 13.2% of the vote while Syriza came in second with 16.8% and no party was able to form a majority coalition.  In other words, today’s poll results are not materially more encouraging than they were before the last election especially after taking into account the usual polling error.

We also have to remember, that unless one party has a landslide victory, they will have to form a coalition government that means negotiations and deals. So I have no idea what the markets are so optimistic about, again it’s not like the US where there is only one winner. That makes polling a lot more accurate. Although, I would not leave my umbrella at home when I see clouds in the sky regardless of what the pollsters tell me.