Goodbye Greece

The Greeks have just voted ‘no’ to the terms of a new deal with their creditors. So what happens next?

I think that Germany-led Europe will let them fall out of the Eurozone. The Greeks think they are going to negotiate a better deal, but any improved deal just invites the likes of Italy to think they can get one. So I can’t see any way forward other than letting the Greeks go.

There will be some chaos in the financial markets, and plenty of short-term chaos in the Greek economy. But within a year a Greece run on drachmas will stabilise and start to show some growth at a more realistic exchange rate.

The bigger problem for Germany and the Eurozone core will then come into a view in a couple more years when an Italy that has not delivered structural reforms and is still barely growing sees that Greece is stabilised and starts to flirt more aggressively with leaving the Euro.

That, however, is two years away. In politics, you deal with intractable problems by kicking the can down the road. And that is why I think Greece has to go. So that Germans can try to imagine, for another couple of years, that the Euro project hasn’t been a monumental disaster.

Unfortunately it has.

That said, Spain and Ireland should be in much better shape in a couple of years which at least reduces the list of countries that might be looking for big debt hair-cuts from German and French banks.

I continue to believe that it is in Italy where the Euro mess will reach its apogee.

Tags: , , ,

One Response to “Goodbye Greece”

  1. Jens M. Salling Says:

    under a bailout will the greek shipowners now be required to pay taxes like anybody else? they sit on about 17% of global shipping tonnage, hide behind us chapter 11 and greek tax breaks? that is tax avoidance within the law in greece but i suppose in europe that would be ok.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: