Monthly Archives: June 2015

Greece’s preferences:

Stay in the Euro and end austerity > leave the euro and end austerity > stay in the euro and keep austerity

The troika’s preferences:

Stay in the euro and keep austerity > leave the euro and end austerity > stay in the euro and end austerity

The troika can crash Greece’s banking system if it tries to end austerity, which Greece can only counter by leaving the euro. Syriza simply can’t completely abandon its pledges on the austerity front, which is what the troika is demanding. So it seems to me that we’re moving inevitably towards Grexit. It seems like both sides in the negotiation are pretending to everyone that there’s a possibility of a mutually acceptable deal, but there’s just not, the preferences of the two sides are just utterly opposed.

And really, Greece’s problems would be hugely alleviated by having its own currency. It would depreciate, making Greek exports more competitive and imports more expensive, encouraging both Greeks and outsiders to buy more Greek products, boosting demand. This, combined with ending austerity and hugely increasing government spending, undoubtedly move Greek employment numbers up pretty quickly.

The real question is what are the other southern European countries going to think if Greece is rapidly reducing its unemployment rate outside the Eurozone in a few years, while their situation remains largely the same as now..