I remain firmly of the view that Greece will leave the Euro in a process beginning before the end of June. On the one hand no one wants a country defaulting, and creating instability in the rest of the region, coupled to a bank run, but on the other hand this bailout process cannot last. Greece's leaders want the European countries to lend them more money to pay off old debts they could not pay before. Why? Sadly because it is patently clear that Greece is living beyond its means and unable to take the action needed. It has now faulted on IMF repayments, and when that happens you really are in trouble. And there is little evidence of any desire for reform in Greece.
The alternatives are twofold. Greece would also like a debt write off, but if the Europeans write off Greek debt then what about Spanish, Italian, Portuguese or even British debt? Why would any country ever bother repaying money in the future? More particularly, why would anyone ever lend any more? And without lending we all suffer as the wider and local banking system dries up.
So that leaves one other option, which readers of this blog know has long been my view: Greece should exit the euro turn its euro debt and currency into drachma and attempt a fresh start with a devalued currency. There could then be a fresh start, and renewed help of the type some European leaders envisage. The alternative is that an impoverished Russia would provide some limited assistance to Greece. I do not see this happening long term, but short term it clearly helps the far left Greek government in negotiations, or so they think, and Putin loves to destabilise the west.
A Euro exit will be messy, both for the Greeks and the rest of Europe. But the short term pain is better than this constant running sore of ever more debt, default, bailout and failure to take action. Anyway, none of our views matter as the Greek people are voting with their feet and have effectively withdrawn all money from the Greek banks. Once this happens an exit is inevitable.
For the view on why this matters the telegraph have an interesting slant: