Moving Out

Uncertainty is scary, more so, if one if one is not even prepared for know unknowns. Unknown unknowns are frightening. This must have been the state of mind of Greek officials on the weekend, or how else would one explain that they were willing to commit suicide. Chances are that Syriza may survive as a lose party but then again much speaks for an outcome where new elections may come up soon, and Syriza may have to drastically restructure if it want to survive as a powerful political force. The real challenge, however, are the economic implications of the proposed deal. Lights can get turned off immediately if bridge financing is not coming up quickly. Even if this would be avoided, the problems start. The orthodox package that was agreed upon is a recipe for economic disaster. This holds in regards to the public debt ratio that will continue to increase. And this holds in regards to the primary budget surplus targets and its combination with the provision that automatic budget cuts jump in in case the original target is violated. This is a economic torture instrument that makes on economic sense at all.

As it is, Greece should ride the tiger and ask for a guided exit from the Eurozone. The ‘compromise’ will produce outcomes that are not acceptable, economically, politically as well as socially. It is time to end the chapter. Probably exactly what German Finance Minister Schäuble is hoping for sine quite a while.