Will Greece exit or be thrown out of the ESCB? Inquiring minds want to know...
I've dug out some perspectives on this from comments post down-thread by some of our commenters some based outside the U.S. below:
Malmo:
Greece surely isn't going to abandon the euro, as there is an overwhelming political consensus against that direct act. However, expulsion from the EZ is certainly a possibility, if not probability if Syriza follows through with it's stated program. Now that the ECB has thrown down the gauntlet of Feb28 as DDay for bank funding absent a deal, were soon going to discover who's bluffing and who isn't. My money is on both parties holding their respective lines firmly. If Greece is expelled I don't know if the coalition can hold together there. I don't see any chance of the Moderate Proposal going through either, so it' my way or the highway time.
Kristjan:
Greece will leave euro, my money is on that. They had a plan like that from the very beginning. Why would they form a coalition with Independents without even having talks with others. The independents are against syriza polittically in almost everything else exept they would leave euro and they are radically against bailout. Syriza will play It out like they were forced out of euro by the tyranny of Brussels. They wanted United Europe like every liberal in Europe does buut they were not given a choice. The ECB has no choice but to pull the plug. Greece will have its own currency in march. Will the Syriza coalition last? I don't know, I hope so, there is not much of the coalition, they only need two to have majprity. Other thing is about Syriza itself, they have different views about euro. I wish them luck, It won't be easy for them. There is going to be drahma in march. Syriza is not backing down.European left is all eurorocrats. All they do is talk anti austerity and attack Merkel. Merkel didn't create the euro, there is no alternative but to go with the internal devaluation if yo want to balance the thing. If Syriza sticks to Its promises to stay with the euro than there is no other alternative than far right to get out of the nightmare.
Ignacio:
Greece cannot get out of the situation without a de facto default on it's debt, either through debt haircuts, jubilees or neo-drachmas devaluation. There is no easy out of it because they have passed the point of no return, and with a multi-years depression having ravaged a lot of their production capacity. They will have to go through a situation similar to those of Latin countries during the 80's or Asian countries during the 90's. And the lockdown between both parties will force this situation.
I'd say we are biased towards a departure for Greece from the ESCB this year at this point.
13 comments:
I don't think so. I think Greece will negotiate a debt forgiveness package with Europe and move on with a fiscal program inside the Euro framework.
Dan,
Fiscal boost sounds great. Trouble is that it puts Greece further in debt. What's the reaction of the Germans etc going to be when Greece says "sorry we're not paying you what we owe you, oh and by the way, can we borrow some more?"
Have we ruled out the possibility of a military coup?
Ralph,
German's will be livid if it goes down as Dan describes (calling it debt forgiveness). But I do think Dan is correct in that this is what Syriza wants to accomplish, given their desire to stay with the euro. Their Modest Proposal is what the Greek government will be pushing for, and they claim it comports with EZ bylaws, so perhaps that will be the ticket that all can agree on?
I don't see a fiscal package being embraced by Germany and others, however. It and other euroland players are out for blood relative to the periphery countries, and the embedded narrative they've cynically sewn regarding Greece is that they are lazy, shiftless moochers. That's going to be a tough nut to crack among these sadists up Merkelway.
...One more thing. Once the debt forgiveness genie is out of the bottle, Spain and Italy will be angrily asking for their forgiveness packages too. Talk about snowball effects! And remember, Tsipras has already said publicly to the Germans that Greece cannot and will not pay back what it owes. Not sure that needle can be thread in this charged environment.
Does anybody see some sort of connection between how they seem to be dealing with Greece and the hardline they are taking with Russia wrt Ukraine?
Im very surprised by how hard a line they are taking with Russia. .. I would have thought that they would have moved on by now wrt Russia and Ukraine.
So maybe this says something about how they will end up dealing with Greece. .. ie 'hardline' Rsp
"What's the reaction of the Germans etc going to be when Greece says "sorry we're not paying you what we owe you, oh and by the way, can we borrow some more?""
Somewhat more subtle than that
The Greeks can very easily pay people in permanent zero rated Euro denominated Greek bonds and accept them as tax payments. That immediately creates a parallel currency within Greece that is sought after by anybody who has to pay Greek taxes.
So there are plenty of opportunities to game the system if they want.
And that's before we get to derogation from certain parts of the EU treaty.
If I were Greece I would call the EU's bluff and see if they have the guts to throw Greece out. My money is that they wouldn't dare, because if they did when Greece started to prosper the EU would be finished.
What's the reaction of the Germans etc going to be when Greece says "sorry we're not paying you what we owe you, oh and by the way, can we borrow some more?"
They will grouse and grumble and adopt their customary morally superior tone, Ralph, but suck it up in the end, and conveniently blame all the other Europeans for forcing them to go along with it.
The fact is, they know that Tsipras is right when he argues that keeping Greece in basket case condition indefinitely so that current creditors can keep rolling over the perpetual rent extraction scheme is a giant drag on the European economy in from a broader perspective. An expanding Greek economy would stimulate growth, import and export markets, and investment opportunities across Europe.
The Germans' uptight moralism about debt matters isn't even good for the Germans themselves. Instead of cutting the losses germinated in the past and moving forward, they are keeping the continent frozen in stagnation because it's a matter of rigid moral principle to them. Merkel needs someone to save her from herself.
I wrote a longer post on my blog, but my reading is that both sides are playing a waiing game.
- Syriza aims to wait for a wider anti-austerity coalition to appear across other euro area countries.
- The Troika hopes to ground Syriza into the ground, and that voters will be disappointed and go back to mainstream parties.
So I would expect that arguments will continue, but they will avoid making any decisions that cannot be reversed.
Syriza is already backing off. They will leak Germany boots if necessary. Is controlled by 'moderates', is like Obama 'hope' lol
This does not end until a far right government enters office in some European nation.
There is not going to be debt forgiveness Dan. This is not how you negotiate debt forgiveness, by "kicking Dijsselbloem's ass". Let's say there is going to be debt forgiveness. What's next? A new debt forgiveness?
"If I were Greece I would call the EU's bluff and see if they have the guts to throw Greece out. My money is that they wouldn't dare, because if they did when Greece started to prosper the EU would be finished. "
That's because you think they are smart calculating people. They are not Neil.
Well, let's see how tough all this big bad capitals debt moralists are once the Greek government starts making noises about nationalizing their assets.
"That's because you think they are smart calculating people. They are not Neil."
I know Yanis knows how to make Greek bonds money by issuing a parallel bond currency that pays Greek taxes.
So the 'drop dead' date isn't one at all. The Greeks have as much time as is required - if they want it.
So we will see how the game theory expert deals with the EU politicians.
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