Greece is to hold a referendum on whether to accept the rescue package from the European Commission, European Central Bank and International Monetary Fund troika.
As Jeremy Warner says, Greece should vote against the deal.
No, not because I\’m a rabid eurosceptic who would just love the project to fall apart. Although I am and I would.
But because a rejection of the deal, while causing intense short term pain, would in fact solve the problem in the best possible way for Greece.
Essentially, it\’s the Iceland option. Default, possibly even repudiate some or all of the debt, bring in the New Drachma and get the problems entirely behind them, start with a clean sheet. And a competitive economy.
An amusement about it is that the EU\’s continual kicking of the can down the road is what has actually made this possible without entirely destroying the European banking system. For what has happened over the past 18 months or so is that the ownership of the debt has moved from being wholly private sector held to being largely (I think it\’s a majority now, or damn close to it) public sector. The ECB, EFSF and so on.
Almost all of this debt is issued under Greek law so there\’s no problem (there\’ll be a lot of whining though) with redenominating it into the New Drachma. And it will be the eurozone taxpayers that take the hit…..no, not gloating about that…..meaning that the European banking system does not collapse into a pile of smouldering rubble. The ECB, EFSF, they\’ll not be in good financial shape, that\’s true.
But it\’s better this than a decade or two of \”internal devaluation\” or, as we could put it, the grinding down of the Greeks into the dust at the behest of the Troika.