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Commentary

Greece Has Rough Choices: Temporary Grexit or Much More Austerity

The weekend is over and there is no Greece deal yet. The latest is that the European Troika are not okay with Greek PM Tsipras capitulating completely on Friday and accepting all their earlier demands, and has asked for:

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All this, plus 50 billion euro worth of Greek assets to be taken out of Greece and placed in a Euro body which will be sold to pay back debt. And all of this has to be okayed by the Greek Parliament and the Greek government by wednesday. 

If not this, then they suggest a “temporary” Grexit, for five years, after which Greece may be asked to return to the Euro.

Our View: This makes no sense. The idea is:

  • Humiliate Greece for using the referendum ploy and make it worse for Tsipras
  • Force Tsipras to resign because he will have no face if he accepts these terms
  • Force Greece out of the Euro in any manner possible

The last point is evident: if banks are closed for two weeks, there is now little time left.

Greece is going to have to make a tough decision soon. The establishment have played this very well, if the plan is to anyhow exit the Euro. This deal makes it sound like they were forced out even when they were willing to bend over backwards. But if that’s the option, they have to take it now, or home resentment for their stand will go against them.

There is no “temporary” Grexit. There is either a permanent exit and debt default, or Greece is in the Euro. The former is particularly likely, unless everyone calms down and is okay with kicking the can down the road again.

Watch this week. Volatility will be back, in a very big way!

  • rohitms says:

    Very interesting view, and yes there are no good choices. But both will lead to turmoil in one way or the other. I thought too that Tsipras might resign as he has failed to live up to expectations. It is shocking to watch how the EU can throw mud in his face. Others might think that he is a traitor. Unusual leaves your mind blank on what to believe and what not to. And this is us market watchers millions of miles away. Think of the greeks!