For a long time I’ve pondered the position of Greece in the eurozone. They face disaster if they remain members. But then they face disaster if they leave. So which is the lesser evil?
I think I’ve resolved the matter in my mind, though I don’t claim the same expertise in these matters as Jeremy Warner of Ambrose Evans-Pritchard.
It now seems certain that Greek bond-holders and creditors will be obliged to take a haircut, whether or not Greece stays in the euro-zone, though its now clear that other euro-zone states fear for their own banks, which are heavily exposed to Greek debt. But from Greece’s point of view, when they come to terms with the “haircut either way” scenario, the solution is pretty clear.
They can either apply the haircut (OK, let’s be honest and call it “default”), but be stuck with an impossibly uncompetitive currency which will condemn them to grinding poverty for the indefinite future. Or they can use their “Get Out Of Jail” card, and leave the euro.
Either way, the reputation and their credit rating is shot. But in the second case, they have a reasonable prospect of an economic recovery within a few years.
So, Athens, time to cut the Gordian knot. And maybe the same advice applies to Lisbon and Dublin, while we’re thinking about it.