economist.com
IN A crisis studded with missed deadlines, Sunday July 12th really could mark the denouement of the Greek debt drama. The leaders of the euro zone along with those of all the EU’s 28 member countries will gather for a set of meetings in Brussels. If Alexis Tsipras, Greece’s prime minister, can strike a deal with his creditors that day, his country will stay afloat inside the euro. If there is no such deal, Greece is heading inexorably towards the whirlpool of Grexit. Donald Tusk, the president of the European Council—a Pole not prone to hyperbole—calls it “the most critical moment in the history of the EU”.
IN A crisis studded with missed deadlines, Sunday July 12th really could mark the denouement of the Greek debt drama. The leaders of the euro zone along with those of all the EU’s 28 member countries will gather for a set of meetings in Brussels. If Alexis Tsipras, Greece’s prime minister, can strike a deal with his creditors that day, his country will stay afloat inside the euro. If there is no such deal, Greece is heading inexorably towards the whirlpool of Grexit. Donald Tusk, the president of the European Council—a Pole not prone to hyperbole—calls it “the most critical moment in the history of the EU”.
All sides insist that their aim is not to eject Greece from the euro, but rather to find a way to keep it in. But the more honest European politicians admit that the likelihood of Grexit has never been higher. Betting now puts it at around 50%. Shockingly, for something so imminent, probable and with such dramatic consequences, there has been remarkably little public debate about how Greece would leave the euro. The best outcome for Europe would still be a deal on July 12th that keeps Greece in. But it is also time to make contingency plans for the sort of Grexit that does the least harm.
In principle, a deal between Greece and its creditors should not be hard. The reforms Mr Tsipras promises are tantalisingly close to those demanded by the other euro-zone countries and the IMF. No one, from Angela Merkel, Germany’s chancellor, to Mario Draghi, the president of the European Central Bank (ECB), wants to be held responsible for pushing the Greeks out. The need for debt relief, the totemic issue for Mr Tsipras, is underscored by the IMF, and—privately, at least—acknowledged by most European politicians who can count. Rational self-interest should also push both sides towards a deal. Grexit will hit Greece’s economy harder than staying in and it will cost the creditors a lot more money. If it leaves the euro, Greece will not just default on its loans from European governments but also its liabilities to the ECB. The total—€340 billion ($375 billion) or more than 3% of euro-zone GDP—is far more than the relief needed to make Greece’s debt burden sustainable.
But rational actors would never have got this far...
In principle, a deal between Greece and its creditors should not be hard. The reforms Mr Tsipras promises are tantalisingly close to those demanded by the other euro-zone countries and the IMF. No one, from Angela Merkel, Germany’s chancellor, to Mario Draghi, the president of the European Central Bank (ECB), wants to be held responsible for pushing the Greeks out. The need for debt relief, the totemic issue for Mr Tsipras, is underscored by the IMF, and—privately, at least—acknowledged by most European politicians who can count. Rational self-interest should also push both sides towards a deal. Grexit will hit Greece’s economy harder than staying in and it will cost the creditors a lot more money. If it leaves the euro, Greece will not just default on its loans from European governments but also its liabilities to the ECB. The total—€340 billion ($375 billion) or more than 3% of euro-zone GDP—is far more than the relief needed to make Greece’s debt burden sustainable.
But rational actors would never have got this far...
Source: economist.com
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http://www.economist.com/news/leaders/21657394-deal-between-greece-and-its-creditors-would-be-best-if-there-has-be-grexit-here
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