Hope resurrected in Greece; Germany keeps paying for deficit to save its exports
We must accept finite disappointment, but never lose infinite hope. - Martin Luther King Jr|AFP PHOTO/ LOUISA GOULIAMAKI
Hope is also a female name in many countries (Speranza in Italian, Elpida in Greek, Nadezhda in Bulgarian, etc.,) and it is common knowledge that “Hope” is the last to die. That is why nobody wants his mother-in-law to be named “Hope” (Speranza, Elpida, etc).
So it seems that the Greek “elpida” (hope) did not die as yet, on the contrary it began to grow again, as the Europeans eventually understood that they cannot let Greece withdraw from the Eurozone. At the same time, despite the new tough austerity measures package about to be passed in the Parliament, the Greek coalition government, instead of weakening, is solidifying its position.
As long as Greece’s partners were looking to the Greek crisis as pragmatic accountants, the chances of Greece remaining in the Euro currency were minimal, if any. Greece counts for less than 3% of the Eurozone and in the past two years Germany and France have intelligently managed to help their banks to pass the Greek toxic papers in their portfolios to the Central European Bank. So, after Berlin and Paris secured their banks, the European accountants thought that they could easily send Greece to hell.
Yet this is the first reading, which is quite simple. If Greece is kicked out or voluntarily withdraws from the Eurozone, the common European currency, liberated from the need to permanently finance the Greek black hole, is likely to revaluate by 15-20%, in ten days time.
As to the second reading, with such a revaluation of the Euro, European exports, especially German, will suffer a significant drop. That is why Germany is reconsidering its stance towards Greece and seemingly prefers to finance the Greek deficits to safeguard its exports while with such a “sacrifice” Berlin is securing the “lion’s share” when the looting of the Greek state enterprises will begin, in the form of speedy privatizations.
Furthermore, a Greek withdrawal from the Eurozone accompanied (or not) by a collapse of the Greek economy (or of whatever is left of it) may drive the country in two different directions.
One is total social chaos, which will lead to a completely new political scenario (probably government elected in the barricades) with potential spill-over effects for the European south. From there on, events may precipitate as the European Union has no mechanisms or experience to handle socio-political crises.
Even worse, the Greeks being people of surprises, it might be that by returning to local currency, the people will make extraordinary efforts and with the involvement of the Greeks living abroad (over five million many of whom over-wealthy), bring back Greece into a rapid development phase in a couple of years time. Such a development will signify the end of the Eurozone as many others may follow.
How and when, Greece will get out of the marsh is a different yet interdependent element which we will analyse next week.
Kassandra new europe post
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