Grexit: It’s Happening
When one party becomes fed up with the other party in a relationship, cooperation becomes difficult. When said offending party is convinced that he or she need only play a better game of Chicken and the other party will fold, and this is not the case… well, let’s review the game. In Chicken, two cars are driven straight at the each other and the first driver to blink/swerve away is the loser. In this game between the (solvent) nations of the Eurozone and Greece, Prime Minister Alexis Tsipras has effectively decided that unbolting the steering wheel and tossing it out the window will bring Greece victory over its creditors. While a bold strategy, it unfortunately ignores the reality that what the Eurozone leaders are in fact driving is a train.
Little details like that are important when you play games at this level.
I suppose it is possible that the Greek voters will chose to accept the offered terms on July 5th. However, that does not seem to be the national mood. Everyone wants done with this unpleasant state of austerity and brinkmanship, Eurogroup leaders included. Greece cannot repay the hundreds of billions of euros she owes. While an argument can be made that five years of austerity politics and no growth have done an adequate job of reducing Greek wages for Greece to be economically competitive, a Greece running its own currency would do still better. As long as Greece is in the Euro, it will lack a key fiscal tool its economy needs. Nor is Greece willing to accept control of its public policy in exchange for the massive cash injections it would need to remain in the Eurozone. Unless the unpleasantness of the next week after the June 30th IMF default is enough to make Greeks change their minds or European public opinion leads the Eurogroup to blink, on June 6th Greeks will return to the drachma. For a preview of that, Iceland in 2009 shows how things could look. Or worse – Iceland just owed a lot of money. Greece has more fundamental systemic issues to deal with as well.
I doubt that Greece will exit the EU, though. There is no reason outside of spite for that. Greek should be in the EU. It should never have been in the Eurozone. This will be a harsh corrective, but as the saying goes, there is no time like the present.