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June 21, 2016

Has Remain already won? Time to move on?

With three days to go until the Brexit referendum the polls are inconclusive. And yet, the markets have made up their mind that Remain will win - so much so that one gets the impression that the Brexit spook is over and it's time to move on. There is no need even to go to the polling stations. Place your bets now, go on holiday, and collect your winnings.

But, is this confidence justified? The FT's poll of polls has both sides at 44% each. We, too, are also a little more optimistic than a week ago but note that, if the poll of polls is correct, Brexit would still win because Leavers are more likely to turn up than Remainers. Remain would need a firmer lead - which they may have by now, but we don't have any hard evidence of that. 

Here is the shift in Betfair trading, where the split between Remain and Leave is now 75/25. We find that highly implausible. 

The decision by Sayeeda Warsi, a former chairwoman of the Conservative Party, to switch from Leave to Remain exposes the strains within the Leave campaign. They have probably pushed their anti-immigration rhetoric a few notches too far. Then again, we have not yet seen any convincing attempt by the Labour Party to mobilise its voters. 

Maybe the market are beginning to realise that their optimism is a little overdone. As of this morning, the pound has weakened over the last 24 hours, though it is up on a week ago. 

21/06/2016lastdailyweeklymonthly
GBPEUR1.294-0.43%2.72%0.14%
GBPUSD1.465-0.27%3.75%1.18%
EURUSD1.1330.16%1.08%0.99%

We always find it fascinating to see how people confound what they wish to be true with the hard evidence they have available. A poll by Politico among EU policymakers had only 14% expressing the view that Leave would win. This was done the day before the murder of Jo Cox MP, at a time when the Leave campaign was well ahead in the polls. What was perhaps the most interesting aspect of this particular poll - a result we do totally believe - is that virtually nobody believed that Brexit would strengthen the EU. There would not be any substantive push for integration by the other member states in that event. 

Note also the Centre for European Reform's new paper on what the UK should do in case of a Remain victory. The authors hope for a renewed push, in areas such as foreign and security policy, energy policy, and neighbourhood policy among others, but they seem sceptical that this will happen. They acknowledge that it would be tempting to go back to crisis management as though nothing had happened. That, too, would be our expectation.

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June 21, 2016

Spanish elections: too close to call

Yesterday was the last day that poll results for Sunday's election can be published in Spain because of a five-day purdah. We illustrate the state of play with two charts. A poll average by Kiko Llaneras (@kikollan) and a week-long daily tracking poll by GESOP for El Periódico. The Gesop tracking poll will continue to be made for the rest of the week (it's not illegal to make polls) and published in the sister paper El Periòdic d'Andorra (as it is not illegal to do it there). So Gesop will provide an estimate of trends to correct Llaneras' snapshot.

Based on the poll averages a week ago, Llaneras gave the major parties the following seat counts out of 350, with significant uncertainty (of seven to nine seats in each direction):

  • Partido Popular (PP): 119 (-4),
  • Unidos Podemos (UP): 87 (+16),
  • Socialists (PSOE): 78 (-12)
  • Ciudadanos (C's): 42 (+2).

His simulations give about 2:1 odds that UP or PSOE will be second. As to adding up to the 176 seats needed for a majority, Llaneras put the odds at 1:3 for UP + PSOE and 1:5 for PP + C's. The odds of neither side achieving a majority are thus a bit better than even. In that case either the Basque nationalist party EAJ/PNV will be able to bring one of the two sides over the top, or (with at least a one-third chance) the only viable alliance is a grand coalition.

As to the poll tracking, Gesop is picking up a closing of the distance between PSOE and UP which is not reflected in the above poll averages. Because of the election system based on small multi-seat constituencies and the geographical distribution of the vote, Gesop puts UP and PSOE tied at around 85 seats each. 

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June 21, 2016

Putin's man in Berlin

Frank Walter Steinmeier was Gerhard Schroder's most trusted lieutenant, his number two in the chancellery. It is no surprise that the two have identical views on most issues, and one of those is Russia. Germany never had a more pro-Russian chancellor than Schröder, and never a more pro-Russian foreign minister than Steinmeier.

Steinmeier made good on his reputation as Putin's man in Berlin once again this week, when he criticised Nato's exercise in central Europe as sabre-rattling and war-mongering. Not only does Germany itself take part in those manoeuvrers, but Daniel Brössler writes in Suddeutsche that Steinmeier's words have been met with exasperation by Germany's Nato allies. Poland, host of the upcoming Nato summit, regards the manoeuvres as an important signal of Nato's defence readiness. We noted a comment by Jan Techau of Carnegie Europe who said that Steinmeier was opening old wounds, as everybody is now once again suspicious of the German Social Democrats.

We are certain that Germany would never vote to take part in the defence of another Nato country if it was attacked by Russia. The SPD would oppose it as a bloc, and there would never a majority in the Bundestag. Steinmeier's comments may not be important in their own right, but they are telling us that his true allegiance is to Russia. This has also become evident in the sanctions debate where Steinmeier has pushed for lifting sanctions despite the obvious lack of progress in the Minsk process.

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