Sunday, January 4, 2015

Last Call For Return Of The Greek Fire

Long time readers know of my Greek Fire series of posts running through 2012 involving Athens and how much trouble the Eurozone would be if it defaulted.  Germany managed to get a handle on Greece in late 2012 and stabilized the country for a couple years.

In 2015, with the Greek government now falling apart and snap elections scheduled for three weeks, the prospect of a Greek collapse and exit for the Eurozone is again on the radar.

German Chancellor Angela Merkel came under fire Sunday over a magazine report suggesting she would be prepared to let Greece exit the euro should a far-left party win a snap Greek election.

Der Spiegel news weekly quoted government sources as saying Berlin sees a Greek exit from the eurozone as "almost inevitable" should the radical leftist Syriza party win the vote and abandon Athens' current austerity course.

Both Merkel and her finance minister Wolfgang Schaeuble had come to consider that Greece's departure from the single-currency bloc would be "manageable", the magazine said.

The recovery underway in other formerly problem economies such as Ireland and Portugal, the establishment of a permanent eurozone bailout fund and the creation of a banking union had all bolstered Berlin's belief that the contagion from a fresh Greek crisis would be limited, it added.

Greece's parliament was dissolved Wednesday after the assembly failed to agree on a successor to outgoing President Karolos Papoulias in three successive votes.

A snap election has now been called for January 25. Syriza is currently ahead in opinion polls.

German media saw the Spiegel article as an attempt by Merkel and Schaeuble to put pressure on Greeks and Syriza leader Alexis Tsipras, who has vowed to end austerity policies.

Neither Merkel's office nor Schaeuble's finance ministry would confirm or deny the Spiegel report, which drew condemnation from members of both Merkel's conservative CDU party and the Social Democrats (SPD), the junior partners in her coalition government.

Nobody believes Germany is going to let Greece out of the Euro.  Pretending otherwise isn't even fooling the German press, let alone the Greek players.  Should the Syriza party come to power in Greece however, we'll see what happens.  Austerity has not solved the Eurozone problem for anyone, not Spain (25% unemployment, 54% unemployment for people under 25), not Ireland (still stuck with bad banks), and definitely not Britain.

We're right back into 2012 on that side of the pond, and it's going to get nasty soon.

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