Tuesday, 23 June 2015

Greek exit from euro

There seems to be general media amazement at just how long Greece has managed to cling on to the euro for. It has been eight years since people first started the countdown on the "grexit" and from one government to the next Greece seems to have defied the laws of gravity and hung on in there.

But think of it like this: if they quit the euro there is likely to be a 50 percent devaluation of their new currency. If Greece owed you three hundred and sixty billion euros would you let them go? I don't think so. They have to be kept at the table. The EU negotiators are playing a delicate game of applying pressure to get the debts paid, or at least the interest payments coming, but not so much that the Greeks throw their hands in the air and walk away.

So far the IMF/ECB/EU troika have proved to  be skilled fishermen. The Greeks keep making concessions but have never left the table. The new Greek retirement age is 67, applicable from 2025, that's up from a very generous 50 for "arduous" professions like hairdressing, and taxes on business are being put up. The Greeks have squealed and complained and looked like they were ready to flounce out but never quite have. That's skill, that is.

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