Business World

Friday 20 October 2017

Going bankrupt in Greece's sunshine may not be so bad

Matthew Lynn

George Papandreou

Prime Minister

Hellenic Republic

Megaro Maximou

Irodou Attikou 19

106 74 Athens

Greece

Dear George, I'm sorry I haven't stopped by for a while. I was thinking of taking the kids to one of your lovely islands over Easter.

And so, completely unsolicited, I thought I should drop you a quick note on how to fix the Greek crisis.

This, as is sometimes the case in life, is a moment for supreme selfishness.

Greece is in a fix. What you need to do is start thinking outside the box. And you have to remember that a nation always has cards it can play, even when it is in a financial hole.

Forget all that stuff about European solidarity. It's fine for an election year in France. But between serious men, we can surely agree that the national interest is all that counts.

And, right now, salvaging the credibility of the euro is hardly what Greece needs.

So, the first thing you must do is antagonise the Germans some more. It's never too hard. The point is to get our German friends so worked up that they refuse a bailout. That's right -- refuse.

A German bailout is the last thing you need. Just think of the last country they rescued: the old German Democratic Republic.

The place was a basket case for a generation. If that's what they did to their own people, think what they'll do to Greece.

It will be years of grinding deflation. They'll impose strict budget limits, clamp down on corruption, and get everyone working until they are 75. Who needs it?

It's hardly the Greek way of doing things. What's the point of all that sunshine if there isn't time to enjoy it?

So, that's what you do. Get them so peeved that a rescue is politically impossible.

Next step: default on your debts. That's right, default.

Just ask yourself, what's stopping you? Tell the bondholders you don't have enough money, offer them 50 cents on the euro, and tell them to go hassle the guys in Dubai instead. What are they going to do? Invade?

Sure, Italian, Spanish and Portuguese bond yields will soar as investors realise euro membership doesn't mean debts are guaranteed. But why should you care about that? This is about selfishness, remember. How they deal with the bond markets is their problem.

As for the yield on your debt, well, if you've defaulted on it, that hardly matters, does it?

True, there will be a nasty hit for the banks when they realise all those Greek bonds they bought aren't worth anything.

But, hey, they're mostly French, German and British banks. Let their governments pick up the tab for saving them again.

Now, of course, there is a problem. How are you going to fund that government deficit, that trade deficit, and a few other deficits that have been conveniently stashed behind a sofa over at the Finance Ministry?

Here's what you do. Work the phones. Your first call should be to that nice Mr Putin over in Moscow.

Those guys have been angling for a port on the Mediterranean since the days of the czars, and, as we all know, Putin is certainly a traditionalist when it comes to foreign policy.

You don't have to promise him anything exactly. Just make the point that with the oil price back around $80, there must be a few spare billion knocking around the Kremlin. Perhaps they could help out with some emergency funding. For which you would, of course, be extremely grateful. Not to say, indebted.

Make sure your press guys tape the call. And make sure they get it on CNN pronto.

Your next call should be to Mr Obama. Things are hardly going so great in Washington that turning Greece into a Russian satellite will look good in the history books.

Before you can say feta cheese, the International Monetary Fund boys and girls will have packed their shades and sun cream and flown to Athens with promises of unlimited bilateral aid.

They'll bail you out, without all the tiresome restrictions the Germans and the European Central Bank would impose.

Think about it. You'll get the best of all possible worlds. You can default on all the debt you ran up in the past decade. You can keep the euro, which means Greeks can still swank around the place with a hard currency. And you can carry on living way beyond your means, just like in the good old days.

Oh, and it will be a while before Ms Merkel will lecture you on austerity.

With that done, you can relax over a small plate of olives and a glass or two of ouzo. And I look forward to seeing you again one day. (Bloomberg)

Irish Independent

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