Monday 20 November 2017

Like Wile E Coyote, Greece is in a state of suspended animation over the cliff

'Short term, Grexit will be traumatic, wiping out the assets of middle-class Greeks'
'Short term, Grexit will be traumatic, wiping out the assets of middle-class Greeks'

Allister Heath

Plus ça change, plus c'est la meme chose. We are fond of French sayings, for good reason: the Greeks have just voted, in dramatic fashion, to defy the European establishment, and hardly anything happened. Sure, the equity markets and the euro fell slightly, and bond yields rose, but Lehman Brothers-style chaos was avoided. It was just a normal, bad day in the markets. Given the seismic nature of the event, and the fact that opinion polls had been so wrong, the fallout was eerily minimal.

The only surprise was that anybody was surprised: a day later, Greece remains a sclerotic, over-regulated economy; it still requires tens of billions of euros in debt write-offs; its banks remain illiquid and shut (now at least until tomorrow); the country will run out of essential supplies by the weekend at the very latest; and the eurozone remains torn about whether it should surrender to the Greeks or inflict an exemplary punishment upon them.

The Greek opposition has backed the government on its negotiation, demanding write-offs and debt restructuring as part of any new deal, while the French have been making dovish noises, but other than that, we are where we were last week. Even the news that the US wants Greece to stay in the euro, presumably to prevent the country from falling under Russian influence, is merely a restatement of its existing position.

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