Via the Daily Telegraph:
17.15: Bloomberg reports that Greek PM Lucas Papademos has requested the country’s finance ministry to prepare a document on the implications of a Greek default. Mr Papademos asked the ministry [to] record accurately and realistically all the consequences of the country’s exit from the Eurozone acccording to Panos Beglitis, spokesman for the socialist Pasok Party, who told Radio 9 [that] iIt’s an important initiative because the Greek people should know exactly what consequences a bankruptcy and eurozone exit would have and thereby take their responsibility.
It’s unthinkable that Greek officialdom has not been thinking about this for months now, so a very public announcement of this type can only be seen as theater, with I imagine, two audiences. If I had to guess, Papademos is reminding Greek voters of where a refusal to accept more austerity could lead (a large majority of Greeks want to hang on to their euros), but he’s also signaling to Germany that its demands risk pushing Greece out of the euro zone — and Europe into unknown territory.
That said, theater or not, I wonder how many (more) depositors in Greek banks will be rushing for the exit without waiting to see how it will end.
Actually, he's trying to herd cats, mostly Samaras and Papandreou and the rank and file. These guys are grappling with that bane of human existence, the 'free rider' problem, a.k.a. the prisoner's dilemma.
If they're the only one not to endorse the troika plan without being responsible for a disorderly default and they inherit the earth. Be for it if it passes and see your support fragment into oblivion, possibly in a very lasting way. In other words, the sane politicians in Greece (remembering that Greece has significant number of communists and anarchists) want it to pass, but they desperately don't want to be seen as the ones that passed it, because it's about as popular as hepatitis right now.
Papademos knows all this. He knows this document and these threats are not going to be credible in the eyes of the electorate, whose disenchantment with politicians of all stripes cannot be overstated. He furthermore knows the politicians who know just how credible the calamitous fates are if the troika walk.
The significance of this document and the politicians general knowledge of the stakes will disabuse the politicians of any hope that they could lay the blame for a potential disorderly default, bank run and expulsion from the euro (if not the EU), on the idiosyncratic post-default circumstances that could be plausibly substituted as the cause of the calamity, (e.g. 'if Venizelos had covered the interest payments from this account until we could renegotiate...', or, 'if Papademos hadn't frozen deposits, none of this would have happened', etc. etc). It basically levels the playing field of political culpability before and after default.
I've no doubt the exasperated Germans and French were all for this move, in the unlikely event it wasn't their idea.
Reply to this commentLinkReport AbuseI think the nightmare scenario is a bank run in the entire Euro-zone.
Reply to this commentLinkReport Abuse"It’s unthinkable that Greek officialdom has not been thinking about this for months now...."
Mr. Stuttaford:
Is it REALLY "unthinkable that Greek officialdom has not been thinking about this for months now"?
Unlikely, yes. Preposterous, yes. Indicative of grave incompetence, yes.
But "unthinkable"? Regrettably, I wouldn't make any big bets on that one.
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