A nasty but not impossible scenario

A nasty but not impossible scenario

I had a flash of a scene from the future just the other day and only hope that it never comes true. In my imaginings, I saw four men in a room. Together with a desperate low-paid Greek pensioner and a desperate Greek businessman trying to scrape by were German Finance Minister Wolfgang Schaeuble and Greek Prime Minister Alexis Tsipras. The pensioner was the most succinct of the four: “We can’t take any more cuts. We need to return to the drachma to have a chance of being saved.” The businessman agreed: “I can’t afford any more taxes or social security benefits. The program won’t work, whatever we do. We need a debt write-down and to leave the euro.”

Tsipras shook his head as he listened. After a few moments of reflection, he responded: “I tried to work something out with them, because I wanted an honorable compromise. But these guys can’t be pleased. You give them pension cuts and they want more. As far as the debt goes, don’t imagine they’re ready to do anything special, just small potatoes and even that will have strict terms. What do you say we take Schaeuble’s 50 billion and write off part of the debt and then get out?” The two citizens thought about this idea and then said: “What have we got to lose? Anyway, they’re already getting ready to kick us out of Schengen and close our borders.”

Schaeuble, who had been listening patiently, smiled: “I told you long ago. You don’t have what it takes to be in the euro. Take the 50 billion to see you through the first tough years and then we’ll rediscuss it. At the end of the day, if you get your house in order you can always be let back in after a time-out.”

Is there any chance of these musings coming true? I wouldn’t rule it out. We have all heard people, albeit with varying degrees of intelligence, speaking of a return to the drachma as though it were the magic solution. And there are some outside of Europe who insist on putting Grexit back on the table.

Meanwhile, people’s anger keeps growing and anyone who is dynamic or productive is looking for a way to leave the country if they haven’t done so already. Foreign investors, without whom the economy cannot recover, have been scared off by the self-destructive uncertainty of the government that appears to be stuck in the 1980s, at best. If talks with the creditors continue as they have to date until May or June, then Greece will run out of money again and the above scenario will not seem so fantastic. Influential players outside Greece strongly believe that the country cannot make the adjustment needed. Inside Greece, there is a powerful lobby pushing the country out of the euro, something that would allow its interested parties to snap up any assets remaining at fire-sale prices with money stashed in foreign banks. Then it will be able to govern like a true, third-world oligarchy, without having to bend to rules and supervisors.

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