A Greece European exit

Posted: January 14, 2015 in Uncategorized

The 25th January there are the Greek elections and there is the strong possibility that Syriza will win and push for a Greek exit from Europe.

The markets are reacting calmly  to the idea….a very different position from the last time a “Grexit” was on the card in 2012.

The difference is that now most of the Greek sovereign debt is on the hands of the IMF and other institutions that can easily handle a Greek mass default. So there is little risk of contagion.

What the market does not seem to perceive it is the political implication of a “Grexit”.

Even if Greece  does not exit, Syriza (the Greek party bound to take power) will ask special conditions, which, if granted, will be asked also by Italy, Spain and Portugal at least.

But let’s stay with the “Grexit” scenario.

A few issues there:

– there is currently no system devised to exit the EU

-if a system is created it must be such that scares other EU member from adopting it themselves.

And what about if a “Grexit” is actually a positive for Greece? Soon other nations would follow.

If you look at history, Italy used quite a few time what is called a “competitive devaluation” of their old currency, the lira.

Usually after one year of turmoil the competitive devaluation of lira was positive for Italy as tourism flourished and Italian goods got so cheap that everyone (specially the Germans) would buy it in drove (well imagine Prada, Maserati, Ferrari and the likes with a 30% discount).

Together with the Islamic immigration issue and the rise of European nationalism a Grexit could be well the seed that terminates the European Union.

In 2013 I wrote an article Europe: Dead on Arrival in which I was forecasting that Europe would not collapse economically as institutions would save the Euro – but the European dream was going to fail anyway. It will happen between 2015 and 2018.

The market repercussions could be not so bad as expected – but the rise of nationalism in Europe brought so much devastations to the world in the past, that the markets are not an issue.

And the enemy has been already identified, Islam.

Note:

Please I do not agree on the fact that Islam is the enemy “per se”, but you can clearly see where “future history” is heading. It is nothing new, the battle between Europe and Middle East started before Christians and Muslims – funny enough it started with Greece and the Persian Empire.

As the old father in ” My big Greek fat wedding” says – it all starts with Greece. And it could well end with it.

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