The time has come. The last cartridge has already been fired, and it is none other than the reunification of the principal payments that Greece owes to the IMF for the month of June until the last day of the month. In other words, 30 June is the moment of truth, since all possible rabbits have already been pulled out of the chisteras of the euro-bureaucrats in these almost 3 years of Greek agony.
Yesterday it was requested in extremis that the June maturities, starting today on the 5th and followed by another due date on the 12th, be combined into a single payment on the 30th. This was the last legally established possibility of postponement without falling into manifest default. No more. The end of the pantomime and theatrics between Varoufakis, Tsipras, the men in black, the iron hand of Dijsselbloem, Merkel and the Vaseline of Draghi and Lagarde. On the last day of June Greece will officially go bankrupt (unofficially it has been bankrupt for years), unless Germany and the rest of the «rich north» give in, i.e. pay the debts of the corrupt south, which is highly unlikely. Let us not forget that some central banks have already prepare contingencies The «Greexit» has been unspeakable for more than 3 years.
What consequences will Greece’s default have? Well, with no neighbours left to foot the bill, there will inevitably have to be a massive printing of new substitute paper money; in other words, it will mean an inevitable yet unpredictable exit from the euro. This is precisely the scenario most feared by European and US central banks, as such turbulence, with its unknown consequences, could undo all the efforts made in recent years to revive the world’s most developed economies and prevent their collapse following the 2007–08 crisis.
This raises a whole host of questions. For example, how will this default affect the prices of other fixed-income securities, particularly those from peripheral European countries, given that it will have opened the door (something that has been denied ad nauseam) for other insolvent economies to follow suit?.
Another issue of vital importance is how this will affect the euro’s exchange rate, given that we face such contrasting scenarios as the potential unviability or indivisibility of the euro as a currency, versus its suicidal strengthening now that it has finally shed the Greek burden. And we say ‘suicidal’ because a return to a euro-to-dollar exchange rate of one and a half would put an end to the fledgling recovery in southern Europe.
The US is perhaps the country most fearful of a turbulent outcome in Greece, and is insisting and putting pressure on Draghi, Merkel and Lagarde to write off Greece’s debt. Of course, as it will cost them practically nothing, they are pressing for wealthy Europeans to cover the southern countries’ shortcomings. After all, that is what any normal country usually does within its own borders. But the fact is that the EU is not a country with national borders, but rather a veritable Tower of Babel with a single dictionary – that is to say, a single currency.
In any case, the speculation and conjecture as to whether Greece would manage to get its house in order, under one government or another, and avoid disaster, are now a thing of the past. After four years of denying the elephant in the room, we have reached the end of the road for the Eurozone as it has been sold to us, even though What cannot be, cannot be, and besides, it is impossible. Bring on 30 June, because at last we are going to face up to the reality that has been swept under the carpet all this time.