A warm-up for Italy?

So, the Med Men caved. They didn’t have the balls to leave the Euro, which might have been their best option. However I am cautiously optimistic, because a fudge scenario in which Greeks are left in charge of structural reforms and they don’t take place (again) may have been avoided. The Med Men caved to such an extent that it looks like Commission bureaucrats and the IMF will be standing right over them as ‘they’, the Greek politicians, write and implement reform legislation. Like doing your homework with Mummy Merkel leaning down with two hands on the kitchen table. That suggests the reforms and the privatisations could actually get done. The trick is for the EU to ease the pain while the change is happening. A lot of drivel is being written about how the deal is ‘worse than Versailles’ and involves no debt forgiveness. Rubbish. Debt is a combination of principal, the interest you have agreed to pay and the term limit over which you have agreed to pay. There have already been big haircuts on the latter two (in the second, 2012 bailout), and more will come. But Mummy Merkel will have to find ways to finesse a bit of extra current spending to ease the pain of the reforms. This is far from impossible if you believe, as I do, that she is a basically decent person (I’d far rather owe her money than the British government, or indeed the average Greek politician). So let’s see. Assuming of course that those who voted No in the referendum and won don’t — not unreasonably — impose their decision by protest. If the reforms go through and Greece starts to grow that way (rather than as a result of devaluation), it is a warm-up for the Siege of Rome. Doubtless Matteo Renzi, who said he was going to Brussels to tell Frau Merkel how to behave, noted the observation of one person party to the negotiations that Tsipras had been ‘crucified’. Ouch. If, as someone once observed to me, Italians fear pain but not death, that is a horrible prospect.

More:

If you have an FT subscription, read Gideon Rachman’s column. He thinks the Greeks won’t do their homework whatever Mummy Merkel does.

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