Greece misses the bailout deadline – Red Line Crossing

Posted: July 1, 2015 in Uncategorized

Yesterday we examined the probable market consequences.

Today let’s do some political sums.

The IMF deadline is crossed. The IMF has 30 days to declare Greece in default. So negotiations are still on specially after the referendum.

Greece is looking at two example of bankruptcy

– Yield to the creditor – Cyprus

– Defiance – Iceland

Cyprus yielded to the creditors and got pillaged. If you remember all the savings over a certain amount got sequestered.

It received bailout and it is still in crisis.

Iceland. It nationalised the banking system and did not pay the creditors (Icesave dispute). The situation was very different from Greece as Iceland had an overdeveloped financial system and received an help from the IMF.

But the idea is that it went bankruptcy, did not pay the debts and now is flourishing again or more that yielding to the creditors do not bring any positive outcome.

So we come to the referendum (Sunday)

A vote YES (to the EU creditor) will bring more hardship and will allow Greece to remain in the Euro adn Euope. And Greece will have a lost generation (well until the current pensioner all die).

A vote No will have disastrous consequences for say 2 years, but all depends on various factor. Even Turkey has come out with some help proposal Not-EU austerity. So Greece could turn to the Middle East/Russia/China for a market…a bit like in ancient times.

If this happens, the consequences will not be immediate, but devastating for Europe and Germany in particular.

If the “pivot East” of Greece is successful, Spain and Italy could follow the example. The free trade European market that allowed  Germany to prosper would dwindle.

Specially a non Euro Italy is a very scaring idea for Germany exports.

At that point there is a kind of scary history about Germany in pain and economic disarray.

Last time it happened it was March 1933 and the rise of the Nationalsozialistische Deutsche Arbeiterpartei – NSDAP (National Socialist German Workers’ Party, commonly known as the Nazi Paty)


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