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Politics : View from the Center and Left

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To: Sam who wrote (172907)	9/30/2011 5:13:50 PM
From: KyrosL	Read Replies (1) of 540756

Hi Sam. There are many problems with what Stratfor says. Economy: Greece still dominates shipping with 16% of total world tonnage including the latest and greatest technology ships but the vast majority of this wealth stays outside Greece. Tourism is around 16% of GDP going on 20% in a few years. Metal mining and agriculture are also substantial. These don't depend much on Greece remaining in the Euro,other than agriculture. Aid: The aid Greece received as a frontier state in the cold war and later as a poor state within the EU was/is around 3% of GDP annually. It comes to around 10 billion euros per year, a tiny fraction of the costs of Euro departure. Leaving the Euro: Neither Greece nor the EU will be helped by leaving the Euro. First of all, there is no legal procedure for leaving the Euro zone, deliberately so. If a country could leave the Euro zone there will be constant speculation as to who will leave and who will stay, and peripheral countries will be very easy to push around by the markets. A precedent of a country leaving will almost certainly push other weak countries to leave and the dominoes will not stop falling until the EU is dissolved. A Greek return to the drachma will be no panacea for Greece. There will be an initial competitive boost because of devaluation but then inflation will set in and the advantage will disappear until the next devaluation, etc. The majority of Greeks understand this and do not want to leave the Euro zone. Costs: The costs Stratfor lists for ring fencing and kicking Greece out of the Euro (which is legally impossible according to EU treaties) are about the same or more as keeping Greece within the Euro and letting it do a controlled default of its non-IMF non-EU debt -- a haircut of around 50-70%. PS. Even though it's logical for Greece not to leave the Euro, it may do so in a disorderly fashion, accompanied by a disorderly default, if the Greek government loses control of the street. There is a distinct possibility this may happen (though I think less than a 50% chance), because the Greek judicial system and police are designed in an extremely liberal way, bending over backwards to accommodate public demonstrations. In such an eventuality there could even be a coup by the left similar to the mass demonstrations that toppled some Easter European regimes, only this time it will be democracy that will be toppled.

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