PROSTRATING

Posted in Quick Hits on June 30th, 2015 by Ed

I have to throw myself at the feet of anyone who knows more about economics and international finance than I – what happens next now that Greece is defaulting on its loans?

I know that the current government is strongly anti-austerity, as is most of the population. I know that the Greek public wants to stay on the Euro somehow, although defaulting on the IMF loan and exiting the Eurozone should (on paper) make that impossible. The only situation I can recall from sort of recent history is the collapse of Argentina's currency and economy in the early 00s. However, in that case the debtor nation was not entwined in any international arrangement as complex, financially and politically, as the European Union.

It is well documented that when individuals end up in financial straits so dire that nothing they do will make it any better, defaulting becomes a more appealing option. "Fuck it, why not?" becomes a very appealing line of argument. If nothing helps, then in a sense nothing hurts either. To me it looks like Greece is heading toward a car accident and has decided its best strategy is to go limp and let the laws of physics take over.

So what happens next? With no political resolution possible and presumably no further deals with the IMF forthcoming, where does this put Greece six months from now?