SemiArticulate

Random Musings
June 30th, 2015 by Lucas

#Grexit

As I type this, it looks like Greece will default on the IMF payment of €1.6b. It looks like the Greek people view this as the lesser of the evils facing the country. Austerity has produced a depression-level contraction of the economy, 25% smaller than the peak, 25-30% unemployment (60% youth unemployment). All the IMF and the ECB (not to mention lender economies such as Germany) could offer is years of “more of the same”.

The Greek government was elected earlier this year on an anti-austerity platform. Anyone half paying attention could see that the democratic mandate was going to have issues with the unelected troika.

One thing I will have to point out, is that “Greek bailout” is seriously incorrect. If Greece defaults, Greece will still exist. It is not like when a company defaults. Countries cannot be dissolved. There will be consequences, some bad and quite painful, but Greece will still exist. So when they talk of bailouts, they are actually talking about bailing out Greece’s creditors (by and large private banks in France and Germany – although a lot of that debt was transferred to the public debt of the IMF and the ECB).

Whatever happens over the next few weeks, it will be rough for the Greeks. Exit from the Euro currency and returning to a devalued Drachma may be the best long term strategy  (due to increased competitiveness of Greek exports), but it won’t be pretty for either Greece or the other exporting nations in the Eurozone.

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