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June 17, 2016

Group 53 marks its difference from Tsipras

Now that the loan disbursement has been approved by the eurogroup and the ECB is expected to restore the waiver next Wednesday, the Greek government is eager to turn the page, with the electoral and constitutional reform one of the main subjects.

The ‘Resign’ protests on Wednesday hardly had any impact, too low was the turnout and too short its duration, writes Macropolis. There might be more coming up in autumn, when the second review is bringing up a debate about labour reforms. The most powerful opposition seems to come from within the party. The largest faction, the Group 53 including Euclid Tsakalotos, now came out with a statement setting out the no-go zones for the electoral and constitutional reform. They oppose a direct election of the president, as suggested by the government, arguing that this would make the president more powerful relative to the parliament. They also object to anything else than a proportional system for the electoral reform. The government has not revealed its proposal yet, but according to media reports they want to keep the bonus for the winning party. Kathimerini quotes some senior party officials speculating that in view of the Syriza congress in autumn, the Group 53 aims to take up the role of those rallied against the party’s apparent betrayal of its fundamental tenets and pre-election campaign pledges.

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June 17, 2016

Polls see Mélenchon ahead of Hollande

We always take election polls with a pinch of salt, especially if they are so far away from election day. The latest BVA poll for the French presidential elections is no exception here. With 10 months still to go it is hard to see how they can forecast the end results of the elections, but they give a good taste of shifts between the different camps and how unpopular Francois Hollande is.  The poll plays through scenarios with all Republican candidates: Alain Juppé, Nicolas Sarkozy, François Fillon and Bruno Le Maire. The poll finds that Jean-Luc Mélenchon is a clear contender for Francois Hollande: he is more likely to end up in second place if the Republican candidate is either Nicolas Sarkozy or Francois Fillon. Hollande even is relegated to forth place if Sarkozy is running. According to the polls, Marine Le Pen would only qualify for the second tour if Alain Juppé is running, but she would always be defeated in the second round.

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June 17, 2016

Why is nobody listening to economists?

This must be a hard time for the economics profession. They come up with one report after another showing the damage of Brexit, and nobody listens to them - other than other economists. We noted a comment by George Magnus asking the desperate question: why do Brexiteers just refuse to accept hard evidence?

The answer is: because it's not hard evidence. They are projections. We think it is a delusion of the profession to believe that its credibility is so strong that people would confuse the two. 

Another comment that revealed the profession's delusions was Simon Wren-Lewis's latest article, in which he expresses disbelief and despair about the way the campaign is going. So do we, but his reasons are entirely different. He is despairing because nobody is listening to economists.

"There is despair because economists and others who think Brexit will make people worse off have no way of getting their message across to those that really need that information. I know Gove has said he is fed up with experts, but I’m not convinced most people are."

We think he is wrong on the latter point. Among the wider public, the profession has lost much of its credibility during the global financial crisis. Economists failed to see it coming, and, as a profession, they failed to see the aftermath. After a short period of self-criticism, they went back to business as usual, and kept on producing economic forecasts that were out of line with subsequent reality. There is a saying that the deep purpose of economic forecasting is to make astrology look good by comparison. This was bit of an inside joke. What is different now is that the wider public knows this, too.

As for Brexit, almost everybody accepts that there will be a possibly significant short-term hit to the British economy. You don't need an economic model to see that. But it would be utterly immoral in our view to base a decision on the long-term political future of a country on a conjunctural effect. The long-term economic effects, by contrast, would be a legitimate issue, but these are much harder to gauge because they depend on factors unknown to us, including, but not only, the exit deal. The attempt to model the long-term impact is intellectually dishonest.

Electorates may not understand economic arguments in fine detail, but they do know that their real incomes have been stagnating for a long time. And many of them have decided, rightly or wrongly, to blame globalisation and European integration, for this fact. We think the link is wrong, but the concern about real incomes is genuine, and needs to be address by policies, not through arrogant "we know better" type responses.

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