Half a year ago, things were very different in the eurozone.
There was talk of a third bailout package for Greece.
It was going to be smaller, but at least there was talk of it.
The Greek economy had turned a corner and actually grown in 2014.
Sympathy remained and creditors were willing to focus on accomplishments.
Then Syriza won.
Five months of political chaos and national financial panic later, Greece has now returned to recession.
The government has declared it will run out of funds a second time, now by June 5 if no deal is reached with its creditors to release the next tranche of its second bailout.
Given that the Greek government has gone as far as to empty its own International Monetary Fund account, it appears that this time, it is finally for real.
If this occurs, there will be no money for Greece to continue paying its civil servants, pensions and creditors unless the Troika caves on Syriza’s red lines on pension cuts, labor reforms and budgetary surpluses.
Naturally, the Troika and Eurogroup are loath to give in.
Doing so would not only be a clear departure from the austerity-based strategy that had finally turned the ship around; it would also encourage the hard left elsewhere in Europe.
The announcement thus serves as an ultimatum.
The goal is to transfer the moral responsibility for a default — either the creditors give up, or they appear to be the ones who pull the trigger.
And if there’s one thing for sure, it is that no one wants that responsibility, be it Germany, the Troika or even Greek Finance Minister Yanis Varoufakis himself.
Should the conflicting sides not come to an agreement (and there appears to be considerable disagreement within the Troika) it is almost certain the European Commission and Germany will be touting their best offer as manna from heaven denied by spoiled Israelites.
What happens if a Grexit occurs?
Will contagion spread across Europe and then the world, like it did during the sub-prime mortgage crisis?
Tellingly, a lot of European leaders are far more willing to let Greece throw itself off the cliff than they were two years ago.
The world has not stood still the last five years: a lesson was actually learned from the subprime crisis.
Today, European banks are far better capitalized, and exposure to Greece is negligible.
The European Central Bank is expanding its printing of money to weaken the euro and thus strengthen the export market and investing the proceeds from the quantitative easing in stocks and bonds.
In short, the bottom line is mostly solid across the continent.
Investors out to make a cheap killing are avoiding Greek assets (despite previous bonanzas in the latter halves of 2012 and 2013) but are looking to invest in other European stocks directly following a Grexit.
Some financial and political leaders even think a Greek disaster would serve as a valuable object lesson to other eurozone voters who might vote similarly … while cold-blooded and an admission of political defeat in the quest for European integration, such an analysis may not be far off the mark, economically speaking.
Whether the next bailout tranche is released or not, things do not look to end well for Greece.
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