For all you budding divorce attorneys it looks like your out of a job, at least for now, because analysts agree that the ECB and Greece are going to stick this one out. In Jack Ewing's NYT article, he argues that it's mutually beneficial (for the E.U. and Greece) to push through these tough times.
Essentially, the ECB has doled out nearly $125 billon to Greek lenders, and if the government declares bankruptcy and their banking system collapses the ECB will be unlikely to see any repayment. Cutting Greece off would also be detrimental to the entirety of the currency bloc, as this could lead to somewhat of a currency bank run, as the news would signal investors to withdraw their funds in the euro.
Last, Greek banks hold a lot of Greek bonds which are being used for collateral against ECB loans. A bankrupt Greece would effectively absolve most of their debts, and the ECB would lose a ton of money taking over the collateral, because at this point Greek bonds would be nothing more than worthless pieces of paper.
Does this influence your opinion on Greek staying in the EU? Reactions?
I don't think this really influences my opinion in one direction or the other. I think throughout the term (and somewhat throughout my academic career at K) I've been conscious of the pros and cons for Greece, the ECB, and the EU at large. While I understand Ewing's points on why they country needs to stay, I still have a lingering thought that in the very long run it will do no good for the country to stay. In the extreme short run, this is of course frightening. In the short run, like Ewing describes, there are a number of reasons why Greece should stay. But in the long run, is it really doing any good? I still see the vicious cycle that Shelby described to us weeks ago.
ReplyDeleteI agree with Cameron that I have been relatively conscious of the options and activities that the ECB, Greece, and EU at large have taken in so far. Greece and the EU would benefit in the long run if Greece left the EU, even if this action results in the dismantling of the EU as a whole. If Greece does end up staying in the EU, Greece will take centuries to pay back its debt or possibly accumulate more debt.
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