They agreed to the conditions for the new bailout so I suppose ECB money is flowing again (which they won't be able to return in a year or two and we'll be back to square one again. Then they'll exchange even more sovereignty for money until we have the United States of Europe, without a single war nor referendum).
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I do not think that there is a contradicton between the solution adopted this week-end and an exit of Greece from the Euro area.
Greece has a highly unprofessional government, which has repeatedly insulted the countries that have already come to help Greece in the past. This has lead to an emotional debate, where the Euro - which is just a currency - has become the symbol for being part of Europe. Of course this is nonsense.
After Mr. Tsipras refused to come to an agreement with the creditors and called a referendum instead, Greece was close to economic suicide with the 4 largest banks on the brink of collapse. Under such circumstances there was no time to prepare an orderly exit from the Euro. A new currency needs to be prepared ....
Therefore immediate action was necessary to moderate the impact of the Kamikaze policies of the current government. The alternative would have been a Greccident, not a Grexit. This would probably have led to severe short term implications for the Greek population.
Now let the emotions settle down, and the work can start for a viable solution. Both Mr. Schäuble and Mr. Sinn have suggested that a Grexit might be the best medicine for Greece. A return to the Drachme would lead to a devaluation of the Greek currency and make Greek products more competitive abroad.
I am not a Neo-Keynesian, but let me cite Paul Krugman:
"Would Greek exit from the euro work as well as Iceland’s highly successful devaluation in 2008-09, or Argentina’s abandonment of its one-peso-one-dollar policy in 2001-02? Maybe not — but consider the alternatives. Unless Greece receives really major debt relief, and possibly even then, leaving the euro offers the only plausible escape route from its endless economic nightmare.
And let’s be clear: if Greece ends up leaving the euro, it won’t mean that the Greeks are bad Europeans. Greece’s debt problem reflected irresponsible lending as well as irresponsible borrowing, and in any case the Greeks have paid for their government’s sins many times over. If they can’t make a go of Europe’s common currency, it’s because that common currency offers no respite for countries in trouble. The important thing now is to do whatever it takes to end the bleeding."
Indeed, and I think you have made exactly the right points. At the time of the negotiations, Greece apparently had not given any thought to returning to its own currency, and had made no preparations for it. They also did not recognize it as an option, which in practice meant that they would end up having to accept whatever terms they could get, a fact that they did not recognize until fairly late.
I think that, in fact, the only viable ending will include significant write-off of the debt, which is truly not payable, and Greece returning to its own currency and the ability to manage its own economy.
(Well, it is hard to have confidence in their ability to manage anything, , but a prerequisite would be the ability to issue their own currency, at the least.)
Last edited by bobwest; July 17th, 2015 at 06:40 AM.
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