Since coming into office, the Athens government has relentlessly argued that Greek expulsion would inevitably trigger an unravelling of the monetary union, and ultimately deal a fatal blow to the European project itself. Until recently this narrative had gained little traction, but as Grexit becomes the default scenario and media coverage more frantic, more commentators warn of a potential “Lehman moment” for the EU. They fear that Grexit would undermine public trust in the core values of the EU and turn the eurozone into a currency-peg arrangement, which will be unpicked by financial markets or populist political leaders seeking an easy way out. Even the German weekly Der Spiegel showed Merkel sitting on ancient Greek ruins, under the headline: “If the euro fails, so does Merkel’s chancellorship”. It may be true that Grexit would be an unprecedented event in the history of European integration and raise a host of difficult legal questions. But the fears for the political sustainability of the euro are vastly overblown. In the short term Grexit would pose no existential threat to the eurozone, especially if it is done in a coordinated fashion. Five years ago the risk of contagion from a Greek default and exit were real. Monetary union remained fragile, with a growing and high divergence in the borrowing costs between the core and periphery countries as investors fled for safety. But this time the markets’ reaction to last weekend’s referendum result has been muted, with the borrowing costs of Italy and Spain rising relatively little from low levels. The economies of Ireland, Spain and Portugal are in a much better shape as a result of structural reforms and fiscal consolidation.Moreover, the European Central Bank has become de facto lender of last resort with its OMT – outright monetary transactions – programme, flanked by new institutions and mechanisms such as the European stability mechanism and the banking union. The majority of Greek debts are held by public institutions, and the size and location of the potential losses are much clearer.
Access Investments-Building Awareness - European Union-ROMANIA
Tuesday, July 14, 2015
Since coming into office, the Athens government has relentlessly argued that Greek expulsion would inevitably trigger an unravelling of the monetary union, and ultimately deal a fatal blow to the European project itself. Until recently this narrative had gained little traction, but as Grexit becomes the default scenario and media coverage more frantic, more commentators warn of a potential “Lehman moment” for the EU. They fear that Grexit would undermine public trust in the core values of the EU and turn the eurozone into a currency-peg arrangement, which will be unpicked by financial markets or populist political leaders seeking an easy way out. Even the German weekly Der Spiegel showed Merkel sitting on ancient Greek ruins, under the headline: “If the euro fails, so does Merkel’s chancellorship”. It may be true that Grexit would be an unprecedented event in the history of European integration and raise a host of difficult legal questions. But the fears for the political sustainability of the euro are vastly overblown. In the short term Grexit would pose no existential threat to the eurozone, especially if it is done in a coordinated fashion. Five years ago the risk of contagion from a Greek default and exit were real. Monetary union remained fragile, with a growing and high divergence in the borrowing costs between the core and periphery countries as investors fled for safety. But this time the markets’ reaction to last weekend’s referendum result has been muted, with the borrowing costs of Italy and Spain rising relatively little from low levels. The economies of Ireland, Spain and Portugal are in a much better shape as a result of structural reforms and fiscal consolidation.Moreover, the European Central Bank has become de facto lender of last resort with its OMT – outright monetary transactions – programme, flanked by new institutions and mechanisms such as the European stability mechanism and the banking union. The majority of Greek debts are held by public institutions, and the size and location of the potential losses are much clearer.
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Why keep Greece in the EU ... under force? is it a EU Uber Alles mentality that won't let it leave and work out its problems under Greek Sovereignty? And if, the EU is successful and takes charge of Greece, expect a huge outflow of monies to it to support it ... forever. When did bureaucrats ever develop a successful economic system?
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