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Friday, January 30, 2015

GREXIT...!!

Even as I write the new Prime Minister of Greece seems bent on not honouring the Debt agreements under the restructuring plan.

The Germans are equally determined not to agree to longer debt payment schedule or any other kind of relief.The Europeans have also categorically stated that they will not write down any debt.It would set the wrong precedent.

Sadly,Alexis Tsipras does not want to privatise state assets nor does he accept economic reality.

That means a Grexit...!!

If the withdrawal is unorderly,chaotic or mismanaged then the repercussions for Greece in the long term will be severe,especially for its general population.Already talk of Banks failing,the currency depreciating again if the drachma is reintroduced.


Inflation,a catastrophic depression and the risk of Greece becoming a basket case are high.As if the Zimbabwe's of the world needed new additions.

What is proves is that no rigid system will work for countries ever closely linked by trade and people.Whether it be socialism or capitalism in its true form,what is required is adaptability of the political class to a world nuanced to subtle economic indicators.

The Euro was expected to lead to free market reforms across the whole of Europe when envisaged as a single currency but that has not happened and protectism under various guises exists in different pockets of a single country in many cases.

Secondly the economies have not allowed immigration from weaker countries to stronger due to racial and cultural differences that have been in Europe for centuries.

Third,it is unfortunate to expect strong economies like Germany to send billions in aid to weaker nations.

The whole concept of a single currency and a one-monetary-policy-fits all approach has failed.It can never hope to become one country under a democratic system that will satisfy all its residents or make them feel that they belong.

That is what makes me highly pessismistic on the long run survival of the Eurozone as we know it today.

When and if it collapses many years hence,the repercussion of trillions of dollars or pounds of debt being written of or devalued will create a depression so huge that certainly the entire World will be sucked in.

I hope sense prevails and if there is to be a GREXIT then it is managed carefully and sensibly.