Well it looks like there is going to be some kind of deal with Greece to avoid the Gr-exit—where Greece exits the eurozone, abandons the euro currency for some kind of resurrected form of the drachma, and, of course, defaults on debt.
Now, I’ve said many times that’s probably the best thing to happen to Europe, is to kick out the weakest link in the chain. But I also didn’t think that was going to happen because I didn’t believe politically that there would be the motivation to do that either in Europe or in Greece.
And if you remember, of course, the current Greek government got elected by promising to bring an end to austerity, and I said at the time that they’re not going to be able to do that. Because if they actually left the eurozone, then the economic problems would get worse and the Greeks would have no one to blame but the current government. As long as they stay in the eurozone, they can continue to blame Brussels or Germany for their problems, and that’s exactly what they’ve done.
The so-called austerity is going to continue. We don’t know all of the specific details of this deal. Who knows—maybe it won’t even come to fruition. But the markets are certainly acting as if it will. But it doesn’t involve any additional haircuts on Greek debt. The Greeks still have to repay, in theory, the money that they borrowed. And the austerity is still there, at least as it’s been described.
Now, there are no significant cuts or maybe any actual cuts to government spending. I think what I’ve read is that Greek taxpayers will have to contribute more towards their own pensions. But that might be scored as a tax hike more than a spending cut, because the government isn’t reducing its outlays. It’s just increasing what it takes in.
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