So it finally looks like the time that Greece will exit the EuroZone. There has been a lot written about this scenario over the last week but I figured I might as well out my two cents in.
I really think that, for the most part, what most people are missing when they talk about the Greek exit is that the austerity movement is, and always has been, a political movement, not an economic one. Austerity was the answer to no one's problems; it was a strategy proposed by Germany because it saw the crisis as its chance to be the economic and political power of the European Union. And goddamn if it didn't seize that chance. Over the last three years, the ECB and the IMF have been seen as nothing more than German agents, and for good reason. When two supposedly independent agents look and sound like the German elite, they are the German elite. It is the only valid explanation when looking at the devastation that austerity has caused win its adopted countries (Greece, Portugal, Ireland, Spain, and Great Britain) that Angela Merkel, The ECB and the IMF can all call austerity the EuroZone's only hope of survival.
And it is that obstinance that threatens to tear the EuroZone to pieces. The situation, has it currently stands, is that Greece is in the middle of a "bank jog". This means that deposits are being quickly withdrawn, in Euros, from Greek banks, but not at a rate to qualify as a "bank run". The hitch is that the ECB is financing this jog, by lending the Euros to the Greek central bank; the ECB is basically subsidizing an EMU member's withdrawal from the currency. Naturally, this can't go on for ever. And the ECB has already threatened to stop lending to banks it deems to have insufficient collateral. Of course, those banks then just borrow from the Greek central bank and the process continues unabated. But there will come a point where the ECB stops doing even that. And that is where things get interesting.
You see, the Powers That Be are in a somewhat no win situation. If they stop lending Euros to Greece, then Greece defaults on its debts, exits the Eurozone and then, well, chaos happens. Because if the Troika (European Commission, ECB, IMF) lets Greece fail, then there is nothing to say that they won't let Ireland, or more likely, Spain fail as well. In an alternative move, if Greece is kicked out, Spain will double down on its austerity plans with rhetoric to the effect of "We don't want to half-ass this and end up like Greece." Ironically, this will push them towards a Greece situation sooner rather than later; as the austerity measures further drive Spain into a depression, bond markets will abandon Spain like they are currently abandoning Greece. So the that is the economic meltdown situation.
The other possibility is that the Troika blinks; and throws all the money it can at Greece to save its banking system (without any austerity demands) to save the Euro. From there, it is likely that voters in Ireland and Spain will realize they too have the same card to play as Greece, and then elect governments that refuse to play the austerity game. (This could also conceivably happen in the U.K., although since it isn't on the Euro, would play more into national politics than E.U. politics) If the Troika caves on Greece, than it loses all the political power it has spent the last few years holding on to for dear life. And quite frankly, political fallout seems more important to these people than a possible economic catastrophe.
The point is right now, the EuroZone, and by extension the European Union, needs leaders. But all it has are politicians. Because of that, it seems the European Project will die a needless and pointless death. Which is good for absolutely no one.
I really think that, for the most part, what most people are missing when they talk about the Greek exit is that the austerity movement is, and always has been, a political movement, not an economic one. Austerity was the answer to no one's problems; it was a strategy proposed by Germany because it saw the crisis as its chance to be the economic and political power of the European Union. And goddamn if it didn't seize that chance. Over the last three years, the ECB and the IMF have been seen as nothing more than German agents, and for good reason. When two supposedly independent agents look and sound like the German elite, they are the German elite. It is the only valid explanation when looking at the devastation that austerity has caused win its adopted countries (Greece, Portugal, Ireland, Spain, and Great Britain) that Angela Merkel, The ECB and the IMF can all call austerity the EuroZone's only hope of survival.
And it is that obstinance that threatens to tear the EuroZone to pieces. The situation, has it currently stands, is that Greece is in the middle of a "bank jog". This means that deposits are being quickly withdrawn, in Euros, from Greek banks, but not at a rate to qualify as a "bank run". The hitch is that the ECB is financing this jog, by lending the Euros to the Greek central bank; the ECB is basically subsidizing an EMU member's withdrawal from the currency. Naturally, this can't go on for ever. And the ECB has already threatened to stop lending to banks it deems to have insufficient collateral. Of course, those banks then just borrow from the Greek central bank and the process continues unabated. But there will come a point where the ECB stops doing even that. And that is where things get interesting.
You see, the Powers That Be are in a somewhat no win situation. If they stop lending Euros to Greece, then Greece defaults on its debts, exits the Eurozone and then, well, chaos happens. Because if the Troika (European Commission, ECB, IMF) lets Greece fail, then there is nothing to say that they won't let Ireland, or more likely, Spain fail as well. In an alternative move, if Greece is kicked out, Spain will double down on its austerity plans with rhetoric to the effect of "We don't want to half-ass this and end up like Greece." Ironically, this will push them towards a Greece situation sooner rather than later; as the austerity measures further drive Spain into a depression, bond markets will abandon Spain like they are currently abandoning Greece. So the that is the economic meltdown situation.
The other possibility is that the Troika blinks; and throws all the money it can at Greece to save its banking system (without any austerity demands) to save the Euro. From there, it is likely that voters in Ireland and Spain will realize they too have the same card to play as Greece, and then elect governments that refuse to play the austerity game. (This could also conceivably happen in the U.K., although since it isn't on the Euro, would play more into national politics than E.U. politics) If the Troika caves on Greece, than it loses all the political power it has spent the last few years holding on to for dear life. And quite frankly, political fallout seems more important to these people than a possible economic catastrophe.
The point is right now, the EuroZone, and by extension the European Union, needs leaders. But all it has are politicians. Because of that, it seems the European Project will die a needless and pointless death. Which is good for absolutely no one.