Saturday, 11 February 2012

Grexit

Grexit being Greek exit from the Euro, of course. Willem Buiter and Ebrahim Rahbari at Citi who previously rated the possibility at 25% - 30% (read 55% - 60%) now rate it 50% (read 80%) likely. What's more, they reckon it's manageable; the ECB would rally round to prop the Euro up, the impact on EU exports to Greece would be marginal (they're not buying much from the rest of us anyway) and our national banks have had a year to get rid of all Greek liabilities so can take the hit.

The suggestion is that Germany has made the austerity conditions just painful enough to force Greece to leave; with Greek Parliamentary elections due in April, the political class there are looking to position themselves on a platform that will win popular votes, and defiance of Germany is popular. Merkel can then, like Pilate, wash her hands in innocence saying "we did all we could to keep them in". 

The Greek police have also declared their lot on the side of the strikers; the powerful police union released a statement saying its members refused to "stand against our parents, our brothers, our children or any citizen who protests". If they disappear from the streets, the government will have no choice but to deploy the army - with all the painful historical baggage that comes with it. No-one wants the colonels back. 

Let's see where we are on Monday morning.

7 comments:

Greg Tingey said...

Can I lugh my socks off now?

Anonymous said...

"No-one wants the colonels back. "

That would imply that not just Greece leaving the Euro, but Greece leaving the EU.

Mr Ecks said...

It depends whether the eurotrash can manage a "controlled" default.

It reminds me of "The Pride and the Passion" film where Cary Grant, Sophia Loren and Frank Sinatra are leading huge band of Spainish anti-Napoleon guerillas in dragging an even hugher (sic) cannon across Spain.
At one point they have dragged the thing to the top of an enourmous hill and Sinatra (leader of the guerillas) is looking forward to an easy ride down. Cary Grant (as a British sea captain and the brains of the expedition ) points out that, because of the danger of gaining momentum, the cannon will "weigh" more going downhill. Sinatra gives a euro-shrug and says "Up or down, it weighs what it ways". Needless to say the descent does not end well.

We shall see I hope.

Anonymous said...

The ministers' yachts are bobbing in the harbour; the diesel tanks are full and so too are the holds full of food.

The cars can be left on the quayside, they aren't worth much anyway.

Coney Island

Nick Drew said...

good start to a novel, Coney

outsider said...

Having just perused the terms agreed by the Greek Cabinet (available on the Athens News website), I would not like them either.
But there is one good feature: the Greek government must report quarterly on progress in achieving a series of detailed numerical and cash targets and take specify additional measures if they are not meeting them.
That would seem a good discipline for our government... except that the Bank of England has to do that and everyone simply ignores the results. The troika promises to be a tougher watchdog than the UK Parliament.

nisakiman said...

The "austerity measures" are unrealistic, and will drive Greece into an ever deeper recession, which is already at a critical point.

Whichever way the cabinet meeting goes today, Greece will sometime in the near future exit the Euro. There is no choice if it wishes to be more than just a (very poor) province of Germany with no hope of recovery. And despite the dire warnings of chaos, a reversion to the Drachma would, after an initial storm, put the country back in a position where it can move forward and rebuild its economy. The billions which were shifted into Swiss bank accounts last year will trickle back, investors will be queuing up looking for deals in the newly devalued currency, tourism will return and most importantly, Greece will be able to control its interest rates and the value of its currency.

All the polls I see show that something like 60% of Greeks want to stay in the Eurozone. I'm not sure where they conduct these polls - (probably Syntagma Square in central Athens), but when I talk to people about it here, almost without exception the consensus is that the Euro was a disaster for Greece, and the sooner the Drachma is re-introduced, the better.

If the shock and ignominy of a Euro exit creates a climate where they can take a scythe to the byzantine bureaucratic system that currently prevails, they will surely prosper.