For Greece, the worst catastrophe now would be to stay in the eurozone

[geek tragedy]

Talk of Greek bankruptcy and its dropping the euro as “an abyss … a nightmare … chaos … unthinkable anarchy” is bankers’ drivel. It will be tough to handle – made vastly more so by being delayed, unplanned and enforced. But handled it must be. Greece is bankrupt. It cannot pay its debts, let alone any more forced on it by “bailout”. There must be a managed default and a restarting of the engine of recovery. That is the only “deal” that should be discussed this weekend.

...

Even if Greece were this weekend to win some debt relief, this would not set it on the road to recovery. Austerity has already impelled the Athens government to curb its madcap public sector. It has begun the “restructuring” that justified similar austerity in western countries (notably Britain) in the 1980s. It can now reasonably argue that austerity’s basic job is done. It is now running a primary budget surplus, spending less than it receives in taxes.

...

Greece’s competitiveness is way out of kilter with the powerhouses of the northern eurozone. Even the EU’s more moderate flat-earthers argue that Greece’s debts should merely be rolled over while it “rebalances” to German levels of efficiency. It must stay shackled to an overvalued rate of exchange lest the great European cause suffer and ever closer union be tarnished. In this spirit a group of leftwing economists, including France’s Thomas Piketty, wrote to the Guardian on Wednesday, lauding the euro as “a beacon of hope, democracy and prosperity”. It is as if Keynes had never lived.

...

The reality is that the eurozone’s managers care more about their loans and their beloved currency than they do about Greece. They should have seen Greece’s budgetary indulgence as a looming catastrophe long ago. They should have admitted their error and negotiated an orderly Grexit. As it is, they have proved unfit rulers of their new Europe. They have harmed its prosperity and endangered its south-eastern flank.

...

Had Greece slid out of the euro after the crash of 2008, it would now be on the road to recovery. Its debts would have devalued. It citizens would be in work. Investors would be investing. Tourists would be flowing in. Perhaps Italy and Spain might be wondering if they too could be better off with a sovereign currency, leaving a tighter deutschmark zone to the north. They would probably be right. But for the time being, the priority is Grexit.

http://www.theguardian.com/commentisfree/2015/jul/08/greece-catastrophe-eurozone-grexit-default

[phantom power]

1. Krugman has been laying out these arguments nicely, as well

[geek tragedy]

2. it's nothing personal, it's just in no one's interest but the utopian EUcrats' to

keep this bad marriage going.

[phantom power]

3. Greece cannot rebuild its economy while remaining attached to the Euro.

At least, the Euro as it is currently being managed.

[geek tragedy]

5. and there's the rub, their interests vis a vis the Euro are not in line with the rest of

the Eurozone.

If it's managed to the slight benefit of 17 countries and to the massive detriment of the 18th, the writing is on the wall

[Warpy]

4. With what has come out about Goldman Sachs increasing the debt load

by moving it around among unfavorable currencies and then skimming the profits, it should be pretty easy for them to invoke the "odious debt" doctrine.

They are going to have to pass some tax law with teeth in it. I do home Syriza is working on that one along with their exit plans.

They can recover from this, other countries have. It is just made much more difficult when they don't have their own currency to devalue.

[Nitram]

6. Not if a deal of debt relief and debt re-payment is tied to Grece's ability to repay it.

If Greece has to fall back on the drachma, everyone will lose their entire life savings and their pensions will be useless.

[geek tragedy]

7. There is no painless option. But Greece needs to have the negotiating leverage to get a debt

reduction. It can't have that leverage when it depends on continued handouts from its creditors just to maintain the bleak status quo.

The set of rules that the Eurozone plays by will never lead to recovery for Greece.

Both sides are better off with Greece being spun off, remember that it was a mistake to let them in.