There is a consensus in the corridors of power that if any eurozone member defaults or leaves, contagion and collapse are assured. This is a fairy tale designed to frighten voters into submission to bizarre government policies. It also ignores two historical lessons.
Coordinated MeddlingEurozone leaders are pouring it on thick again today with warning after warning. Yesterday, German chancellor Angela Merkel, French president Francois Hollande, and European Commission president Jean-Claude Juncker were all I in on the Coordinated Meddling hoping to convince Greece citizens to accept the current offer.Rajoy Seeks to Save His Own Ass
While the Santa-rallying markets have been suspiciously sanguine in the aftermath of the failed Greek presidential election on Monday and the ad hoc vote scheduled for late January which could - if left unchecked - lead to an unraveling of the Greek bailout and the expulsion of Greece from the Eurozone, events are now in motion that would end with the unwind of the world's biggest and most artificial currency and political union.
The head of the European Central Bank once again said today that a Greek default "would not happen". Every G20 official - in or outside the eurozone - will tell you the same thing: with markets as fragile as they are, it is unthinkable that a sovereign government would be allowed to default. Investors and experts are thinking about it all the same.
NEW YORK — Rating agency Standard & Poor’s on Tuesday raised Greece’s sovereign credit rating to B-minus with a stable outlook from selective default, citing Europe’s efforts to keep the country part of the euro.
“The upgrade reflects our view of the strong determination of European Economic and Monetary Union (eurozone) member states to preserve Greek membership in the eurozone,” S&P said.
EU Solidarity has splintered widely as Ministers Ram Through Refugee Quota Plan over the objections of numerous countries. EU interior ministers on Tuesday imposed a plan to relocate 120,000 refugees across the EU, outvoting four eastern European countries strongly opposed to the scheme.
LUXEMBOURG/BERLIN/ATHENS — Greece will be in default with the International Monetary Fund at the start of July if it fails to make a repayment on June 30 because there is no grace period or possibility to delay, IMF Managing Director Christine Lagarde said on Thursday.
“It will be in default, it will be in arrears vis-a-vis the IMF on July 1, but I hope it is not the case, I really do,” Lagarde told reporters following a meeting with the Luxembourg finance minister.
Yves here. This post by Michael Bordo and Howard James finds significant parallels between the 1920s and the economic and policy conflicts facing the Eurozone, which does not speak well for them being resolved tidily. The post is dense at points but it is very much worth your attention.
By Michael Bordo, professor of Economics at Rutgers University and Harold James, professor of History at Princeton University. Cross posted from VoxEU
By Simon Johnson
The big question of the week in Europe is deceptively simple – will any countries that share the euro as their currency default on their government or bank debts in the foreseeable future? The answer to this question determines how you regard bonds from countries such as Portugal, Spain, Italy, and Belgium.