Is Greece really going to leave the eurozone?

No one knows.  Nor should you react too much to the latest headline or tweet.  The further apart the various parties appear to be, the more the whip of concession gets cracking.  The closer to an agreement they may seem, the greater the incentive to play hardball and demand further concessions.  So short-run news reports are hard to interpret, don’t obsess over them.  A given swing very often implies a counter-swing in the opposite direction, even if the latter has not yet made a headline.  So the direction of the last-reported swing just doesn’t contain that much information.

We won’t know until the proverbial “fat lady” sings, namely deposits leave the country at a critical pace, or not, or the ECB cuts off Emergency Liquidity Assistance, or not.

So why, then, do I believe that Greece will leave the eurozone?

First, I do not see that (most) extant commentary is properly accounting for the very recent fiscal collapse of the Greek economy.  I am not sure there is any fix, and the expression “failed state” comes to mind.  The momentum here does not seem to be positive.

Second, I do not assume Syriza — whom I have called The Not Very Serious People — have a coherent bargaining strategy at all.  I take this point from a broader reading of history, where I see that quite often leaders in critical positions simply do not know what they are doing.  By no means is that always the case, but it is more often the case than narrative-imposing journalism encourages us to perceive.

Third, I believe we as observers tend to overestimate the permanence of trends/state of affairs which have lasted ten to fifteen years or more.  That included the Great Moderation and that also includes Greece in the eurozone.  In a broader historical perspective, the arrangement simply doesn’t make sense to me, as there is more than one Europe.  So I am willing to predict its end.  And the next year seems like a quite possible time for that end to come about.

Fourth, I still don’t think enough commentators are stressing how much the creditor eurozone countries see this as a nested game, where concessions to Greece would have to imply larger concessions elsewhere and embolden Podemos in Spain.

Fifth, it is hard to see Greece being in truly safe territory for the next few years to come, even if a handy bargain is dispatched over the next day or two.

I gladly admit all of those reasons are speculative rather than firm or based in concrete information.  But that is what I think and why.  I don’t consider this kind of prediction to be very scientific, but still we proceed by engaging in discourse and, next time around, seeing what we got wrong the time before.


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