Wednesday 17 January 2018

Greece and the Euro – should they stay or go?


JUST 30 years ago the Clash, one of the most influential British punk bands ever, released a single that shot to number one in the charts, 'Should I Stay or Should I Go?' I have found myself humming the lyrics over and over in my head for the last few days and yes I've been thinking about Greece and the Euro - should they stay or should they go?

As I write this the Greek Prime Minister, Antonis Samaras, is travelling to Berlin and Paris and he is not bearing gifts - rather he is seeking them.

He is simply looking for more time, two years to be exact. "All we want is a little more air to breathe to get the economy going and to increase government revenue" was his plea to the influential German newspaper Bild. Describing the catastrophic shrinkage of the Greek economy, 27% in recent years, his words are strong and heartfelt "Greece is bleeding, it's really bleeding".

So should they stay or should they go? Samaras thinks not and describes a possible euro exit for Greece as "a catastrophe for us".

But the choice may not be his alone, in fact it won't be. The markets are pricing in the near certainty of a Greek default. That's not the same as a Greek exit but would almost certainly precipitate it.

There are contradictory messages emanating from the Eurozone. Official Europe, in the guise of Mario Draghi, President of the European Central Bank (ECB) is saying he will do whatever it takes to save the Euro. However, the chinks that have appeared in the common message of maintaining a Euro status quo are now widening to cracks.

A German policy maker from the ECB, Joerg Asmussen, said recently that a Greek exit or Grexit would be "manageable". The rumblings in Austria are growing louder by the day. A 79 year old Austrian billionaire who made his fortune in Canada has just returned home and set up a new political party. Its central plank is a euro exit for Austria and a return to its old currency, the Schilling. Within a very few weeks it has gained an 8% support rating in the polls.

The lure of a national currency is gaining strength in Finland, the Netherlands and Germany also. So, who will stay and who will go is perhaps an open question. Indeed the Austrian Freedom Party that advocates just a strong core group of Eurozone members is sitting at a very comfortable 21% in the polls.

Bailout fatigue is slowly spreading over Europe. Those who class themselves as donor countries - Germany, Finland etc. are getting impatient. The recipients, ourselves included, are not alone sick and tired of austerity but many are rightly questioning its effectiveness.

As you read this, Brussels will be back in gear again debating the seven year 2014 - 2020 budget. Life goes on despite the fact that nobody really knows if we will have a Eurozone by 2020 or even who will be its members.

The Clash must have had second sight when they warned us "if I go there will be trouble, if I stay there will be double, so baby please let me know, should I stay or should I go?"

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