Grexit front and centre

The US doesn’t want a Grexit, from the FT:

US Treasury secretary Jack Lew has raised the pressure on European leaders to grant some debt relief to Greece to help avoid its exit from the eurozone and what Washington sees as an unnecessary hit to the global economy.

Warning that a Greek meltdown would cause hundreds of billions of dollars of economic damage, Jack Lew issued the Obama administration’s loudest call yet for compromise on Wednesday.

The IMF doesn’t want a Grexit, from Zero Hedge:

  • IMF’S LAGARDE SAYS DEBT RESTRUCTURING NEEDED IN GREECE
  • IMF’S LAGARDE SAYS FUND REMAINS ‘FULLY ENGAGED’ WITH GREECE
  • IMF’S LAGARDE SAYS IMF CANNOT GIVE GREECE SPECIAL TREATMENT

Greek PM Alexis Tsipras doesn’t want a Grexit, from the FT:

Alexis Tsipras, the Greek prime minister, promised EU lawmakers he would seek a compromise with Athens’ bailout creditors before the end of the week, but warned any agreement must not add to his country’s economic hardship.

Just hours after being given five days to reach a deal with its creditors or face exit from the eurozone, Mr Tsipras told the European Parliament both sides in negotiations have been “called upon to produce a fair compromise”. But he argued a deal without public backing inside Greece was futile.

“My country has been transformed to an austerity laboratory. This experiment has not been a success,” Mr Tsipras said. “We demand an agreement with our neighbours, one that gives us a sign we are exiting from the crisis which will demonstrate light at end of [the] tunnel.”

But Germany does, from Reuters comes the German finance ministry:

“At the moment and in principle we see, as the chancellor said expressly in her press conference in Brussels, no occasion at all to discuss this issue – there is no leverage or basis for that,” Martin Jaeger said at a news conference.

“That refers to a haircut in the classic sense but I explicitly add we also take that to mean measures that aim to bring about a reduction in the cash value of debt – those are things that you hear in discussions under profiling, restructuring and similar things”

And so, Grexit approaches, from Mohammed El-Erian:

This sequence is smart politics. It gives time for all parties involved in this tricky and protracted negotiation to reflect on the dramatic developments of the past few days and calmly respond to them…But this good politics is bad economics.

…Every day that goes by intensifies the Greek economy’s economic and financial implosion. With the banks shut for more than a week now, economic activity is grinding to a halt. Tax revenues are collapsing. Tourist trips are being cancelled. Unpaid government, corporate and household bills are mounting. ATMs are running out of cash. Pensions and salaries are paid only partly, if at all. Whatever capital is still mobile is looking to flee the country. And already alarming unemployment and poverty are on the rise.

It could well be that European leaders have come to the realisation that, even if they were willing to give Greece another chance, the crisis has now slipped beyond their ability to control events and act effectively. And, since none of them wish to go down in the history books as having “decided” the first exit from the single currency, their most practical option could well be to maintain the negotiating pretence until the situation on the ground forces the Grexit that most now deem inevitable in any case.

Grexit.

 

Houses and Holes

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.

He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.

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Comments

  1. Being first to exit the Eurozone will be a bonus that Greece will have over the economies that will eventually follow, Portugal Ireland and Spain at the very least. Every threat has its opportunities and while its going to be really difficult is is appropriate that the disaster NOT be transferred to future generations.

    Whether by chance or by intent I believe the measure of an economic success is what we hand down to the next generation.

    That is why with all of the difficulties ahead the Grexit is ultimately and eventually the morally correct oucome.

    • “…That is why with all of the difficulties ahead the Grexit is ultimately and eventually the morally correct oucome…”

      Agree and probably why it will not happen.

      If I was the Arch Duke I would not be driving around in open top cars for a few months.

  2. Everyone other then Greece will benefit if Greece stays in the EuroZone chains, hence it will be kicked out only if other things prevail.
    For one, if Greece remains in EZ and that devaluates the EUR, who’s exports are to benefit from it?

    • Obviously Germany is torturing Greece to serve its own purposes.

      Of course, all this will end well.

      • My take is that Merkel is trying for double whammy because of a strong support from local and near-by plebs or just plain that she wants to prep her own plebs for a “deal” that would still be presented as an ultimatum but it will generally provide a workable solution for Greek (aka humanitarian loan, not a bail-out or similar)
        Bottom line, Greece holds the “Royal Flush” but lacks a poker face.

  3. No German politician wants a media soundbite of them “talking soft” on Greece when the inevitable deal is made at the last minute. So not even Germany wants Greece to go.

    Greece will exit, but only when at least one party has no other alternative. I am not quite sure that is the case yet.

  4. Greece needs to leave. But they will not…so sad. They are going to subject themselves to further austerity, no growth, asset sales just an absolute disgrace. Appreciate many may find this anti semetic and it is not (I promise I have Jewish friends if that helps assure you) but Tsipras is Jewish. He will not betray his tribe.

    • Are you implying that Varoufakis was sacked by Syriza/Tsipras for being too good and not giving-in in critical moments?

      • Reading Naked Capitalism last night and the view is that Tsipras wanted a YES vote so he could exit left stage, but is stuck with being a hero of the NO vote. He wanted to accept the deal and it was Yanis that pushed to issue so there seems to be a fracture in the relationship. Yanis is still an MP so is holding Tsipras to account. I can’t find the thread but it was published 8/7.

  5. I never fail to be amazed by the duplicity of Lagarde. After pummelling Greece for months she now wants to hand them the olive branch of “restructure” she rejected outright a few weeks ago, but she doesn’t want Greece to get special treatment? Huh!
    And to cap it off, she says the IMF is fully engaged with Greece. Is this old chook experiencing memory loss or is she just plain devious?