It appears Greece will inflict more torture on its population in exchange for a delayed but inevitable default.
What is starting again is though the usual brawl between Germany and Greece.
Germany’s EU commissioner Günther Oettinger said Europe should send blue
helmets to take control of Greek tax collection and liquidate state assets.
An “orderly insolvency” for Greece must not be ruled out for the sake
of stabilizing the euro, Die Welt reported, citing German Economy
Minister Philipp Roesler.
While the headlines in the Greek press have been
“Unconditional Capitulation”, and “Terrorization of Greeks”, and even
“Fourth Reich”. Mr Schauble said there would be no more money for Athens under the EU-IMF
rescue package until the Greeks “do what they agreed to do” and comply with
every demand of `Troika’ inspectors.
Even if the Papandreou government met every Troika demand at this point, it
would not make any material difference. Greek citizens already understand
this, and they understand that EU loan packages are merely being recycled to
We have never been so close to an Euro breakdown. Friday’s resignation of Jurgen
Stark at the European Central Bank is literally a disaster, a German vote
of no confidence in EMU management.
The vehemence of his protest against ECB bond purchases confirm what markets
suspect: that the ECB cannot shore up Italian and Spanish debt markets for
long without losing Germany.
An exit from the Euro is although no solution as well.
If a debtor such as Greece left, the new drachma would crash by 60pc. Its
banks would collapse. Switching sovereign debt into drachma would be a
default, shutting the country out of capital markets. Exit would cost 50pc
of GDP in the first year.
If creditors such as Germany left, the new mark would jump 40pc to 50pc
against the rump euro. Banks would face big haircuts on euro debt, and would
need recapitalization. Trade would shrink by a fifth. Exit would cost 20pc
to 25pc of GDP.
The scariest part is the entrenchment of both sides on their positions which is making impossible to find a definitive solution to this mess. Either the EU push toward further integration with harmonization of fiscal policies and loss of sovereignty toward a central EU government or we are facing an inevitable collapse.