This is how the euro ends – not with a whimper but a bang
By Jeremy Warner
May 15th, 2012
With Greece unable to form a government and therefore now set on new elections, how’s this going to pan out? Very badly, is the almost certain answer.
Let’s look first at the now odds on possibility of a Greek exit. The outcome of the last election was basically just a protest vote – the Greeks are against austerity, against the programme, but they also want to stay in the euro. They want to have their cake and eat it too, and they are gambling that when the Germans come to look into the abyss and realise the devastation a Greek exit will cause, they’ll give them the cake – oh, and let them default on all their external debts and provide big Marshall Plan style grants to rebuild their shattered economy to boot. And where do they expect the money to come from? The tooth fairy?
Next month’s election will be different. Even the Greeks must realise that it’s now a straight choice – the programme or the dreaded drachma. But the Germans are changing, some protest. Francois Hollande will persuade them of their folly, and a gentler, more conciliatory eurozone will be born. This is just wishful thinking.
Angela Merkel shows no sign of fundamental change. The rhetoric is becoming a little more growth friendly, but on structural and fiscal reform, she’s not for turning. Politically, it would be too much of a climb down for her to admit she’s got the economics all wrong, and anyway, she’s a true believer in the path of austerity. Pouring more money at the problem will only make matters worse, she thinks. Greece must buckle under or quit.