Hangover coming

The folks celebrating the referendum “no” vote in Syntagma Square tonight in Athens are going to have a bad hangover. The Germans will likely stand firm, since doing otherwise would risk undermining the euro’s credibility. If Prime Minister Tsipras respects the referendum, Greek banks are unlikely to have sufficient euros to reopen as scheduled Tuesday.

Athens will need to issue a new currency, which will take time. Once issued, it will fall rapidly in value, making repayment of euro-denominated debt even more difficult. Several debt payments are due during July. The biggest slice is, ironically, owed to Germany (via Aljazeera): Sixty per cent is owed to EU member states and the European Central Bank (ECB). The amount is however relatively small from their perspective, so the default is unlikely to affect the euro much, unless nervousness spreads to Portugal, Italy and Spain. The ECB will want to focus its resources on preventing contagion. Negotiation of the “haircut” on the existing debt, which is what Greece hopes for, will take months if not years, making lenders leery of pouring good money after bad.

Out of the euro and issuing its own currency, Greece will theoretically be able to increase its exports and decrease its imports. But austerity will not end. Greece’s government will be insolvent and not creditworthy, making it impossible to stimulate the economy (or even pay government workers and pensions, except by printing money). Russia may ante up, but with far less than the situation requires. It will also insist on tough terms. Religious orthodoxy is no substitute for repayment guarantees.

Politics could intervene at any point, forcing Prime Minister Tsipras out and leading to formation of a new government committed to cleaning up the mess. But it will be years before confidence is restored. Greece has chosen a hard road that leads to an uncertain destination. Greece used to think it could get the Elgin marbles back from London. Now it will be lucky if it doesn’t have to mortgage the Parthenon.

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3 thoughts on “Hangover coming”

  1. You pretend to be left but you follow no principles when it comes to supporting the Greek left — but apologize for far right VMRO? (your pals for years no?)

    Just another example of your severe prejudices towards Greeks. Bigot.

  2. Greek, please, if you have nothing to contribute intelligently, then why write. Of course it was a night of drunkenness (or perhaps 6 months) and hangover is yet to come, and will you detox or suffer it as it is or, even worse, engage more drunkenness it is up to Greece. Nothing is going to be different. For 6 months the new government managed to wreck 5 years of hardship. In December Greece was capable of servicing its own budget without credits and servicing interest of 3.4%. Now is incapable of doing anything. You are in a bad shape for what, 5 years? Perhaps you do not remember the state of affairs before the Greece entered the Eurozone and the EU. Much richer countries cannot pay for the lifestyle you had. 34.5% employees in public sector. 14-17 billions in salaries in public sector only. And that is only salaries. You get write off of more than 100 billions. Since 2010 you are short 30 billions when the salaries are deduced from the 60 billions borrowed. No one can pay that lifestyle nor for that lifestyle. And no one can expect from someone else to pay for it indefinitely. That money is money of the average Joe working and saving in some other European country, there is no money in banks other than of the other european citizens. Citizens that you call terrorist or nazist. Withdrawal from being hooked up on credit is never easy, and it takes for complete recovery. And here you have a reasonable man, Mr. Serwer, saying reasonable things, and you spit poison for no reason at all but your hatred for his efforts to resolve dispute between Greece and Macedonia. There are voices that think that the best thing wold be to drop you down the drain and have no problems anymore. Europe will rather survive 360 billions now than 600 billions 5 years from now.

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