Euro Crisis: “Nice little country you got here. Shame if anything should happen to it.”

Whilst we’re waiting for Turgon’s Greek Tragedy to break, here’s a precise little comment from the Economist:

…the effect of Greek departure from the euro would be disastrous for the country in the short term. Its revenues would be in devalued drachma; its debts in euro. Not just the government but the banks and part of the corporate sector would have to default; capital controls would be needed to stop Greeks moving their deposits abroad; it would have to balance the budget on its own.

Given that Greek GDP is just 2% of the EU total, one might think that the rest of the continent would easily cope. Some banks would lose money but northern European governments could simply bolster their capital, using money they might otherwise have paid the Greeks.

However, the real threat of a Greek default is in the example it would set. Citizens of other European nations would see the chaos; they might figure that their savings would be safer in German, rather than Portuguese (or Italian) banks. Bond investors might feel the same; yields would rise further. Official creditors (including the ECB) might take a hit, making it even more difficult for them to participate in other bailouts.

For all the bluster, one can’t help feeling the tough EU stance is a bit of a bluff. They can’t view a Greek exit with anything other than fear.

Bluff, and double bluff


  • Munsterview

    Mick “…For all the bluster, one can’t help feeling the tough EU stance is a bit of a bluff. They can’t view a Greek exit with anything other than fear…..”

    This is viewing the Greek turmoil and it’s relationship to the EU project through ‘normal’ political lends.

    While the current focus in the EU is on economic factors effecting the EU and have been for some time, the EU project is about far, far more. Those who frame ‘the big picture’ and take the long view, cannot afford to allow The Greeks to exit, that is not part of the script. Accommodations will be found or rather fudged.

    We have a perfect example here in the North East of this Island, an artificial structure to make an artificial, bankrupt entity work where everyone pretends the outworking are ‘normal’ democracy.

    A similar pragmatic fig leaf will be found for Greece, in terms of European Civilization and the ‘European Project’ it is simply in it’s own right too iconic to discard. Letting it go could also begin the process of a greater unravelling and shedding of other countries.

    What we are seeing is the outworking of European Countries, Societies and peoples requirements V ‘Money Markets’ operations in adjusting to a new operational status quo. There is a strong Left in Europe, Communism have not gone away you know, if conditions are allowed to continue in Greece where there could be a renewal of this particular brand of politics, then France, Spain, Italy and Portugal could see the renewal of Communist Parties and politics also in these countries.

    When faced with this scenario the price of ‘fixing Greece’ is very small potatoes indeed for what the unseen masters of the New European Project’ stand to loose.

  • Cynic2

    The problem is that the misbehaviour of the Greeks means that the Eurozone countries have no choice but to expel it.

    Equally the sacrifice of a goat at this stage may be useful ‘pour encourager les autres’

  • Ronan Ssmith

    I think that the Greeks should be expelled from the EU.

  • The problem wasn’t caused by Greece alone. Those charged with carrying out the due diligence investigation before Greece was allowed to adopt the EURO failed miserably. They did do such an investigation, I hope, and didn’t just accept what Greece told them at face value.