Greece playing with fire of default. What to teach ‘divorce … – Il Sole 24 Ore

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This article was published June 12, 2015 at 6:57.
The last change is the 12 June 2015 at 07:53.

Greece risks everything but playing with fire the default, even if, in fact, the failure it would not be immediate. The extreme limit, however, is about to be reached. Less than three weeks after the deadline for the repayment to the IMF (1.6 billion euro) and the extension of the second bailout (which provides for payments in favor of Athens 7.2 billion) the government tries to Tsipras to prevail the political choice of the technocratic creditors. Primary surplus, VAT, pensions, privatization are among the most intricate knots of the negotiation, which fluctuates from month between approaching a step away from agreement to the overthrow of the table.

It happened yesterday, when after the summit in Brussels the night before between Merkel, Hollande and Juncker Tsipras, finished with a promise – though vague – to step up negotiations, and as the Prime Minister met with greek new (climate described as “friendly”, after the sparks of the previous days), the European Commission president, the head of communication of the IMF, Gerry Rice (which has partially dissolved) attacked the government greek and gave news of the return to the basis of the delegation of the institution of Washington. With a stalemate, obviously.

During the day, the president of the Bundesbank, Jens Weidmann warned: Athens, at this rate, the default risk is rising “from day to day.”

At this point we would have to bet on a deal as long as it (as repeatedly asked the US invasion), but the last breath. Although it is true that different analyzes – from that of the president of the German Institute for Economic Research Ifo, Hans Werner Sinn, to those of other market participants – argue that the impact of a greek default would be “structurally” limited, according to others , for example the economist Lucrezia Reichlin of London School of Economics, the effects of a crack could be very serious on the political side, destabilizing the entire euro zone.

The World Economic Forum has been practiced in the representation of some possible scenarios if the situation were to change for the worse. In an article, please note that according to Oxford Economics, there were more than 70 “divorce” from currency unions since 1945. There are three cases that have similarities with the Greek crisis: Ireland in 1979, Slovakia in 1993, when he separated consensually the Czech Republic, and Argentina in 2002, when he abandoned the peso-dollar parity.

Return of the drachma, after a sharp devaluation
The Argentina devalued initially by almost 30%, Slovakia 10%. But Barclays has estimated write-down to 45-85% for countries in a similar situation to Greece. The Bank of Greece should beat a new currency in a very short time and it is said that the operation succeeds. Commercial banks would be in a position of extreme vulnerability. Interest rates would rise putting pressure on other euro area countries, primarily Italy and Spain. For Greek companies would be bankruptcies.

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