|It seems that a game of chicken is being played here |
In essence Greece has defaulted already.
The 3.2 billion CDS's are chicken feed. The country owes what, a 130 bn?
The game being played is not chicken, but a combination of hot potato and musical chairs. But in this case there is more than one potato being passed around. And it's musical chairs where some of the chairs are invisible, are being taken away more than one at a time and, maybe, sometimes, put back.
We know for sure the Greeks don't have any chairs and they do have hot potatoes.
Some of the bond holders have a hot potato but still have chairs. Others of them wrote off their bonds - no hot potato and still have a chair.
others wrote off their bonds - no potato - but their balance sheets are so bad their chairs are invisible and every time they have to sit down it's a sort of hold-your-breath experience.
The Greek potatoes are big, fat roasters and anyone holding them is burned severely. Of course the Greeks who deserve to hold one never even get to touch it. The 30 - 40% of Greeks who actually work and support all the others get to hold 'em.
The Greek "hot potatoes" are the prospect of two or three generations of astronomical unemployment, mass emigration, general misery and lots of violence not seen since the end of the 1940s while they pay off the Europeans. Maybe even a revolution - a real one with guns and lots of dead people.
They can of course give their hot potatoes to the Germans and French by defaulting straight up, going back to the Drachma, and going thru 3 - 5 years of huge discomfort while they reorganize and reform. Any rational person would say they should have done this a couple of years ago.
So why haven't they, and why might they not do so?
A lot Greeks thought joining the EU and Euro was a good idea because it would get the drachma out of the hands of the corrupt, degenerate political classes and impose some discipline on the banks and maybe, maybe they'd loan to folk other than their friends.... The prosperity thru welfare crowd saw all the social programs the French and Germans had, and thought it a good thing if Greece had such programs. Lots and lots of folk thought paying lower interest rates like Germans was a wonderful thing - cheap money.
But joining did not get rid of degenerate politicians. It did not remove the Ottoman-inherited web of corruption, patronage and tax evasion. Every law and regulation was and remained a rent seeking opportunity, (thus, the necessary, tax evasion). Starting and running a business remained an exercise in frustration. Protecting special interests stopped Greece from developing a modern economy.
But things were better! There was so much money raining down on Greece that ordinary folk could be bought off with prosperity through welfare - retirement at fifty, unending civil service positions, cheap medical care, and so forth. And it was a lot easier to borrow money even if it remained difficult to do anything useful with it.
So, now money is no longer raining from heaven; the country is more or less under administration by the EU; it doesn't have a legitimate government; 20% unemployment rate,(fifty percent for those under 30); exponentially increasing numbers of folk living in the streets; economic activity shrinking at an accelerating rate and constant violent demonstrations.
Money is dribbling in from the EU. Just enough to let the govt rollover its debt and get by with running expenses and it's contingent on “structural reforms”: Firing scads of civil servants, lowering minimum wage, cutting welfare and subsidies, removing impediments to business etc. And of course the govt is squirming and wiggling and trying to do as little of that as possible. And this is why:
I saw a very interesting interview with a Greek businessman who said, “I'll make out like a bandit if Greece defaults. I'll be paying 10 cents on the dollar. But it will be horrible. Just like it was with the drachma before, because it's the same people.”
Unfortunately the reporter didn't push at this point but an illustration I picked up from Ekathimerini explains it well. Its been forty years since a new trucking company was established in Greece. The running joke is it costs more to bring a lettuce from Piraeus to Athens than it does to bring it from France. It take years to get the licences and permits to start a business and then there are all the “inspections.” And every rule, regulation and law is a rent seeking opportunity for someone.
Remember the guy said,”It's the same people.” They don't want to gore their own oxen.The EU oversight won't mean any thing unless it forces Greece to get rid of 90% of its laws and regulations having to do with business and land development. That won't kill rent seeking but will remove a lot of opportunity. So a lot of Greeks think they might be better off inside the euro, for a while, anyway if real reforms get pushed through.
Fifty % unemployment for those under thirty should be a motivation for those politicians who want to remain in country and keep their heads. There is no welfare scheme that can possibly cover that sort of mess. The only thing that can sort it out is to have no impediments to business development
Get done what EU forces them to do and then default, since they can't possibly pay, that would be a plan.
Will they do it? Don't know. They're going to have an election end of April. Very likely the winners will be lefties but they will have no money to spend and no way of getting it so prosperity through welfare won't cut it.