I am following the news the last days, to try and form an opinion about what is going to happen with Greece.
I was expecting a deal to happen last week, but to my surprise everything went belly up when the prime minister decided to throw a referendum to the Greek people, and then the European Central Bank decided to stop liquidity to the Greek banks, causing the Greek government to shut down the banks and enforce capital control to prevent a bank run and a financial collapse.
Now, I find this referendum out of order for the simple reason that both choices (at least in my opinion) are bad.
The YES choice means that the vain policy of extreme austerity will continue and shrink the market even more, making the poor even poorer. The problem with Greece is that I didn’t see anyone stinky rich losing any money all these years. The referendum just squeezed money out of the people that never had much.
I agree that up to a point the many Greeks have lived beyond their means, but the same applies at least from what I see to many British people today.
The NO choice means that Greece is cancelling the last years of austerity and so-called bailout and starting on its own, at a really bad time.
For good or bad reasons, Greek farming, along with other industries is not in the state where it was before Greece got in the Eurozone and signed treaties that capped production.
The thing that worries me the most though is how Greece is going to buy things that can never produce in big numbers, first one being petrol and energy in general.
Who will accept Drachmas in exchange for these goods and even if this is the case, profiteering would be the first thing that comes to mind.
Let’s not fool ourselves, for a country to get out of a common currency, is uncharted territory. There may be many plans, but there will probably be unforeseen consequences and panic at the markets.
When capital controls were introduced in Greece in Monday, the Euro plummeted for a bit -to Germany’s convenience though, since this is good for exports- and then stabilised back to where it was, because of a hope of a deal at the end of the tunnel.
Apart from that, there are also practical problems, like when are they going to print and ship all this money. My knowledge is that at least 6 months are needed to order and receive the money from a money printing company, like De La Rue.
Now, many claim that a NO does not mean an exit from the common currency, but still, if this is true, the German government will have to explain to German people that they have just been throwing money around for something that was never going to work.
So the exit may not be the next day, but in my mind, this is just a leverage tool to minimise collateral damage and panic at the markets and contagion to the weaker economies of the Eurozone.
The worst thing about the referendum though, is the fact that it divides the Greek people even more, making it hard to start fresh either way.
This is totally separate from the fact that the question itself is so vague and open to interpretation that the Greek media already started their propaganda.
Up to a point, one could thing that all of this was planned and this is the divide and conquer step.
Anyway, it is really hard to place any bets on the situation, I literally have no idea what will happen, things are completely changing in an hours time.
To be continued…