Friday, 19 June 2015

Keep calm and muddle through it: three reasons why a Grexit will not happen

Greek talks must yield immanent agreement,” “Greek exit from euro appears increasingly likely,” “last opportunity” – I can’t take it anymore. For months my Facebook page has been spammed with doomsday scenarios. Every meeting is interpreted as a sign of the coming Grecopalypse. Every statement by a European politician is seen as revelation. Every day is the final chance for the Greek government to avert disaster. Enough. It is clear that this is nothing but a desperate attempt to keep an audience fixed on a topic that is starting to bore them. Of course I am no prophet either, but here are three reasons why Greece will most certainly not leave the eurozone.

Firstly, the Greek government continues to successfully place its government bonds on the global bond market. Only yesterday Greece sold government bonds at a reasonable interest rate of 2.5%. If Greece were going bankrupt, it certainly isn’t showing on the international bond markets.

Secondly, the eurozone governments are aware of the consequences of a Grexit. It may be true that the exposure of eurozone banks has decreased dramatically over the last four years (French exposure to Greek debt is approaching zero); nevertheless, if one country drops out of the eurozone, financial speculation will surely target the next. Remember that the reason for the explosion of Greek debt level has been a skyrocketing interest rate on Greek government bonds following the financial crisis and the instability of the Greek banking sector. These interest rates could only be financed using the EU/IMF bailout money. From the point of view of financial speculators, the Greek sovereign debt crisis has been a hugely successful endeavour. If Greece drops out, the next country will surely follow. Avoiding this scenario of a potential collapse of the eurozone is in everybody’s interest. Also, while Mrs Merkel is certainly no friend of mine, she does see herself as a European with heart and soul. She doesn’t want the European project to fail while she is chancellor. 

Thirdly, from the point of view of the Greek government, the consequences of a Grexit would be absolutely catastrophic. You have probably read the Greek version of the Book of Revelation – but let me remind you of the best parts: pensions and public servants’ salaries would be received in a worthless currency; inflation would make imported products (like petrol) unaffordable; Greece has very little to export and thus has no way of getting out the mess in the medium-term future. Rising unemployment would lead to riots, demonstrations and finally new elections. A victory of far-right groups is not unthinkable. Any deal with the EU and the IMF is better than this.

Now, keep calm. You’re convinced...right? All this panic is all just a media scam... Surely, our representatives will act the end…* So, I really hope that this post will be widely read, have a huge impact and become a self-fulfilling prophecy. Otherwise I fear that we may all wake up from the European dream into a neo-nationalist nightmare.

*PS: Okay, fine. People don't act rationally. Neoliberals assume that they do, but they don't. A Greek default would thus be the ultimate defeat of rationalism and neoliberalism. Yet another reason why it can't happen.