The outcome of the Greek referendum indicates strong support for the its government. The decision is being construed by some commentators as the prelude to Greece leaving the Euro, and possibly the European Union. It doesn’t have to be either.
First, the Euro. Greece can use the Euro for as long as it wants to, and no-one in Europe has the power to stop it. The Euro is a tradeable currency. Greece might be forced off away from the decision making processes about the Euro, but that’s already happened. It can’t be stopped from trading in it.
It has, at least up to now, been stopped from printing Euros – that’s done in Germany. What would happen, though, if Greek banks were to print their own versions of Euros, in the same way as Scottish banks print off their own versions of pounds? Other Euro members wouldn’t like it, but the sky will not fall in. People couldn’t be required to accept Greek Euro notes abroad, as Scottish notes don’t have to be accepted in England, but money is money; if people accept it, it will be used. Besides, most money isn’t dealt in cash; the real issue is whether the banks behave as if the money is there. That would, of course, all be against the rules of the Eurozone: but I think we’re past that.
The second big issue is the debt. Here, the position is plain as a pikestaff: the debt is not going to be paid. Greece’s European creditors have behaved very badly, as if moral rules applied only to debtors, not to creditors; but beyond that, the programme for austerity they have been insisting on is economically illiterate. Greece cannot cut its way out of a its present position. The main question is whether the default will be orderly or disorderly.
Effectively, the Greek government holds all the cards. Beware of tangling with people who have nothing to lose. They can’t be thrown out of the Euro, they can’t be forced to leave the EU and they will get debt relief. It’s time for the EU to cede with good grace.
Good comments. Thank you for a concise picture.