Pretty good comment on Krugman's blog that captures why this thing is such a cluster.

@TheStalwart: A radical solution for Greece: adopt the renminbi
https://twitter.com/TheStalwart/stat...00885055254528

"The Chinese get a foothold into Europe. They invest billions into Greece, where they reassemble Chinese goods into Europe with no tariffs or hassle...."

Instead of temporary Grexit, Germany should suggest temporary annexation of Greece, thus taking them into the fiscal embrace of Europes greatest economy.

Once Germany has fixed Greece like it did East Germany after reunification, Greece can be made independent again.

Should have a referendum in Germany on this proposal.

Auctioning off Crete as a military base might be the ticket. Russia and China are down but Iran looks to be coming into quite a bit of cash.

I generally agree but dont think a "few billion" euros is very fair summary of the amounts involved and also of the political gravitas of said sums.

Meh, just a few billion euros.

I dont see anything wrong with the view that the EU is mostly fine, but the Euro is a bit of disaster.

Are the countries that didn't join the Euro basically just loling it up at this point?

Wouldn't surprise me at all if Greece has made zero plans for the case where they leave the Euro. The combination of delusion and incompetency that country has is stunning.

Greece is certainly best off not signing their country over to Germany but even as an independent their problems are so deeply institutional that it's going to be a horrible path for them. I just hope the rest of Europe sends them food and water.

this being a win fun the right-wing populists takes some of the fun out of it. it's a win for the left-wing guys too, but they're harmless.

also the people suffering ruins it a bit.

Suppose there's a deal. You think there's any serious chance Greece gets to the point in the next decade or so where it can seriously service/repay it's debt? As far as I can see, whatever Greece does there will be a need for more action in the future and most of those scenarios will include can kicking but not include Grexit.

I hope that if a deal is done there will then be further action taken to help Greece with the aim of making the problems much more tractable next time. Figures like 200% of GDP aren't as bad as they seem if it's a small country having some GDP 'given' to them by much bigger ones. Whatever is done though its not going to end the problems this time - if done well a few more hefty kicks might begin to do the job.

If I got decent odds on it I would bet on things being more or less fixed this time. They basically were last time until Syriza got elected, with the debt being just about sustainable, the economy (probably) growing and the first primary surpluses (yeah Greek unemployment still sucked, but it would be getting better).

a 3.5% primary surplus in 2018 sounds pretty tough, especially if the economy has been too badly hurt by this, so maybe something will be done about that and the debt/payments. But if there's a genuine effort to build some trust, and Greece starts selling over the counter medication on Sundays, then stuff can probably be worked out without too much hassle.

I would like to see the required debt payments the next 10-15 years, but I dont think they're too bad as a percentage of Greek GDP. They'll probably make the payments on the added debt stretch until 2080 or something.

Better yet not joining the EU.

As you say you would need decent odds. It requires a fair wind when it looks more like stormy weather ahead.

Is Merkel in trouble domestically?

Only if she gives the Greek more money without reforms. That would guarantee her losing the next election. That is assuming she could get a package like that through parliament which is already not likely as everyone that votes for that is at risk.

Trust is the biggest issue here. I doubt the EU really believes Greece will pay back the debt but as the current Greek government has shown you can't even trust them to keep agreed reforms in place. Some of those reforms are things everyone except the Greek politicians and their friends agree on. Greece has to get to a budget surplus even if the debt is written off because nobody is willing to lend them money. Reversing measures that were put in place to get there is not going to help no matter how the negotiations go.

It worked GREAT in other EU countries convincing the population that Greece is not going to pay its debts.

It was not semantics, what do you think the next Greece government is going to do about the deal? Respect it? With 60 % of NO-voters at this point before any of the cuts hit, they probably will wipe the floor with those papers.

Greece is not going to pay these debts back ever in any meaningful way.

Well yea of course, the above is basis for any bet.

We disagree on the fact that given how hard its been to reach a settlement this time, with it being the first time Grexit has actually got onto the documentation and been really discussed as an option, Grexit will be even more on the agenda next time.

I am sure it would hurt the markets if there was a grexit but Greece is just a dead weight now.

the best analogy i can think of in a few seconds is like a parasite clinging to its host ripping of the parasite will leave a wound, and for a temporary period weaken the host maybe kill it. But there is a chance it will survive.

However not doing so will weaken the host as time goes on eventually killing it for definite.

i say just let Greece hit the floor. mind you the global economy is probably dead anyway.

A deal is done(ish)

Greece has to pass reforms by wed
'Growth package' of 35 billion
Debt restructuring
Looks like no assets being taken

Still plenty of opportunity for the current 'deal' to collapse but otherwise the bet is on.

Grexit may have got onto the table but it's also become clear just what an nightmare that is for the EU/Eurozone politically. almost impossible to force through in practice. Greece could choose to leave (they still might) but the biggest problem with Tsipras' negotiation is it became clear he was bluffing - if he could have somehow framed the situation as him being one of them but it was out of his hands unless he was helped to keep Greece in then he might have got a better deal. Could still happen -the fat lady hasn't sung yet.

http://www.bbc.co.uk/news/live/business-33476597

A bit. But then the realisation that a Gexit would impact on other countries financially even if their not in the Euro Zone kinda tempers that.

I should have been clearer about what I meant. The debt relief/restructuring that's talked about might happen at some point, but other than that I think there's over a over 50% chance this fixes it. I think we're unlikely to see bailout #4 or Grexit and I think debt restructuring will likely happen pretty peacefully.

Judging by Wiki, looks like center left/right yes campaigners still got 120 seats or so out of 300. I am guessing Tsipras has their votes and most of his 149.

Fat Lady hasn't sung yet but I think the worst might be over. Handing over fiscal sovereignty and state assets may turn out to be a good thing long term for Greece as they learn how to do things without patronage and clientelism.

There will probably be some debt forgiveness since the 50 billion asset transfer is essentially a foreclosure/chapter 9 liquidation/collateral all rolled into one. I still suspect it won't be a straight "classic" haircut since that's harder to get parliamentary approval for but the deal will have a lot of refunds, deferrals, and lengthened maturities. Like the last two deals, this deal will probably have some built in provision for "profit returns" that effectively amount to market based monetary rewards and stimulus packages as reforms are implemented.

The hard assets will work great as collateral for ECB purposes. 25 billion is probably like 20% of Greek bank assets now, more than enough to justify a massive infusion that should stabilize the Greek banks. If the 25 billion were just a loan backed by more Greek bonds, the situation wouldn't be so clear for ECB.

I have found the whole situation to be fascinating. It's got a little bit of everything. Politics, finance, economics, history, negotiations, and even a little game theory.

btw if anyone wants to know what's meant by 'reforms' (Phonebooth?) then this is much of what they're going for http://www.oecd.org/daf/competition/...sment-2013.pdf

It's not spending cuts or tax increases. It's bakery liberalisation, Sunday shopping, selling of over the counter medication in supermarkets and so on. It's the standard neoliberal stuff, but from OECD instead of the IMF because the IMF is for poor 3rd world countries. It's also why the pharmacists' union is planning to protests the deal.