In the wake of Cyprus, the euro can survive

Everyone hold your breath... and then chill out and have a Easter egg.

This weekend you should spend as much time as possible holding your breath or crossing your fingers. Storm clouds are gathering throughout Europe and the downpour could begin as early as Tuesday. First of all there is the ongoing Cypriot tragi-comedy; tragic for innocent islanders and retirees who just saw the island as a nice place to keep their savings and see out their days, comedy with regard to the performance of the Troika; judge, jury and executioner in the form of the European Central Bank, (ECB), the International Monetary Fund and European Commission.

Secondly, there is the Italian political imbroglio, which this week descended into chaos as Grillo, the leader of the neo-anarchist Five Star Movement, called M. Bersani and Berlusconi something almost unprintable and Bersani said, “only an insane person would want to govern this country, which is in a mess and faces a difficult year ahead”, following his failed attempt to comply with the President’s request to form a government, raising the likelihood of months of uncertainty and new elections. Rumours abound of a possible credit rating downgrade over the weekend.

Thirdly, Slovenia is quietly imploding and nudging its way onto traders’ screens. The political situation is not much better than Italy’s and the banking system has bad loans equal to 20 per cent of GDP. These resonances caused its government bond yields to soar this week, following the Cypriot "solution".

Along with these near-term, possibly explosive threats, the Eurozone has to continue to cope with the slow-burn problems of Spain, which is failing to meet deficit reduction targets and, perhaps most frighteningly, France’s slowdown. Throw in the chasm opening up between President Hollande and Chancellor Markel and the Euro’s prospects may seem dire.

Notwithstanding all of the above, I remain cautiously, but resolutely certain that the Euro can survive, at least for the foreseeable future - meaning the next three years, say.

If we have learnt nothing else over the last few years it should be that the political will to ensure its survival is enormous and that the ECB is prepared to almost totally divorce itself from its Bundesbank heritage to play its part. Witness the protest resignations of two senior Bundesbankers from the ECB since the crisis broke. Merkel will masterfully persuade the German people to provide just enough largesse to southern Europe, without enraging her populace beyond breaking point, she will probably bend just enough on austerity to satisfy Hollande’s calls for growth, and after the elections she will probably even support the issuance of joint and several Eurobonds, which put all nations on the hook to the same degree. Finally, this Thursday, Draghi will give a masterful performance at the post-ECB meeting press conference, in an echo of his famous "whatever it takes" speech last year.

Cyprus can become a tragic memory, Italy is rich and will survive, Slovenia is small, and Spain and France will slowly respond to growth enhancement. Meanwhile, the US will surprise us all with its outperformance this year, once again acting as an economic locomotive.

So, let your breath out and have an Easter egg, if that is your fancy.

Look at these lambs. They're not worried about Cyprus. Photograph: Getty Images

Chairman of  Saxo Capital Markets Board

An Honours Graduate from Oxford University, Nick Beecroft has over 30 years of international trading experience within the financial industry, including senior Global Markets roles at Standard Chartered Bank, Deutsche Bank and Citibank. Nick was a member of the Bank of England's Foreign Exchange Joint Standing Committee.

More of his work can be found here.

Cameron in Nuneaton. Photo: Getty
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Why fewer of us want a long-term relationship ... with a political party

In 2015, 38 per cent of voters backed a different party to the one they supported in 2010. So what does the rise of swing voters mean for British politics?

For decades political parties have competed furiously for one of the great prizes of British politics: the affections of the swing voter. It wasn’t that long ago that there were relatively few political swingers: until the 1990s, fewer than a quarter of voters would switch parties from one election to the next.

Yet that once relatively rare breed is becoming increasingly common, which means party campaigners are going to have to come up with new tactical thinking. The British Election Study survey panels, conducted episodically over the last fifty years, are unique in that they are able to track the same voters from one election to the next, unlike more conventional opinion polls that only look at a snapshot of voters at a given time. Using these studies, you can identify the percentage of voters who switch their vote from one party to another between each pair of elections since 1966 when such data was first collected.

In 1966 only around 13 per cent of voters had changed their minds since the previous election in 1964. Since then, the proportion of swingers has been steadily increasing, and by 2015, 38 per cent of voters backed a different party to the one they supported in 2010.

The increase in swing voters is pretty consistent. The only exceptions are between February and October 1974, when (understandably) fewer voters changed their minds in eight months than switched in the preceding four years, and between 1997 and 2001, when the electoral dominance of New Labour under Tony Blair held back the tide for a time. These two exceptions aside, the increase has been constant election-on-election.

A lot of vote shifting can go on even between elections where the overall result remains stable. In 2001, for example, more people switched votes than in any election before 1997, with a surprising level of turmoil beneath the surface stability. While these largely cancelled out on that occasion, it set the stage for more dramatic changes in the parties’ votes later on.

So British voters now seem more likely than ever to jump from party to party. But who exactly are these swingers? Are they disillusioned former party loyalists? Or have British voters simply stopped getting into a serious relationship with the parties in the first place? We can get some insight into this using data from the yearly British Social Attitudes Survey, looking at the number of respondents who say that they do not identify with any of the political parties (party identifiers tend to switch much less often) when they are asked ‘Generally speaking, do you think of yourself as a supporter of any one political party?’ and then ‘Do you think of yourself as a little closer to one political party than to the others?’ if they say no to the first question. The graph below combines data from 1984 to 2013. Each line represents people who were born in a different year. Higher lines mean that there are more people who do not identify with a political party. So, for instance, voters born in 1955 started with very low levels of non-identification (22 per cent), which have gradually risen to 44 per cent in the latest survey. Most of the lines on the graph go up over time, which shows that almost all generations are falling out of love with the parties.

However, an acquired taste in swinging among the older generations is dwarfed by the promiscuous younger generations – shown by the dashed lines – most of whom never form an attachment to a party at all. Each generation in the data has been less committed to the parties than the previous generation was at the same age, with around 60 per cent of the youngest generation – those born since 1985 – expressing no attachment to any political party.

Since most of this change has been a generational shift, it may be a long road back for the parties. Loyalty to parties is often handed down in families, with children inheriting their parents’ commitment to a party. Now that this process has broken down, and younger generations have lost their attachment to parties, they may in turn pass on this political detachment to their children.

The majority of younger voters have simply never grown up with the idea of getting into a long-term relationship with a political party, so they may never settle down. Many Labour MPs were outraged when it turned out that lots of the new members who joined up to vote for Jeremy Corbyn had voted for the Green Party just a few months before, but this may simply reflect the political approach of a generation who see parties as needing to earn their vote each time rather than commanding lasting, even unconditional loyalty.

If Britain’s newfound taste for swinging isn’t going to disappear any time soon, what does it mean for party competition? In the past most people had settled partisan views, which seldom changed. General elections could be won by attracting the relatively small group of voters who hadn’t made up their minds and could very easily vote for either of the two main parties, so political parties based their strategies around mobilising their core voters and targeting the few waverers. While they worried about traditional loyalists not turning up to the polls, the parties could be assured of their supporters’ votes as long as they got them to the voting booth.

Nowadays, swing voters are no longer a small section of the electorate who are being pulled back and forth by the parties, but a substantial chunk of all voters. This helps to explain why politicians have been so surprised by the sudden rise of new parties competing for groups previously thought to be reliable supporters. The new parties that have entered British politics have also allowed voters to express their views on issues that don’t fall neatly into traditional left– right politics such as immigration (UKIP) or Scottish independence (the SNP). This in turn has posed a dilemma for the traditional parties, who are pulled in multiple directions trying to stop their voters being tempted away.

This may just be the start. If the number of swing voters stays this high, the parties will have to get used to defending themselves on multiple fronts.

This is an extract from More Sex, Lies and the Ballot Box, edited by Philip Cowley and Robert Ford.