Thursday, January 1, 2015

Why I Think Greece Will Leave the Eurozone in 2015 or Soon Thereafter

Tyler Cowen writes:
First, I think Germany regards Greece as a kind of cultural and economic cancer for the eurozone, and they don’t want to enshrine the principle that eighty percent default is OK.  Second, Germany sees a fair amount of eurozone stability right now (NB: I’m not saying stability is always good in every way) and has noticed that the contagion effects from the recent Greek troubles have been small.  This is not a bad time to get them out.  Third, Germany is smart and knows that the real problems are Podemos in Spain and just about everyone in Italy and maybe even a few people (or more) in France.  Now is a good time to send splinter parties a message that they had better not mess around with the Troika, and what could do that better than an economic disaster in a recalcitrant Greece?
So I think Germany will play brinksmanship with Syriza and, when the time comes, simply pull the plug and leave them high and dry.


  1. then they should expect Rafales over Germany then.

  2. Greece has a debt of 180% GDP, most of it in euro and USD. If it goes to drachma, with huge devaluation, how much will that become? Moreover, the major political party supporting a Grexit, wants to eliminate private sector and nationalise (make public) everything. How will that augment the economy?

    1. But the Greeks, Italians and the Spanish aren't going to leave without having to be booted out and Germany can't do that without incurring the wrath of France who will not stand for a German dominated Europe. That was the whole point of the EU, keeping the US in, the Germans down and the Russians out.