La carrera

Tyler Cowen

About 30 percent of the Greek debt is held by Greek sources, including the banks and the Greek government, in its social security funds. A default on the latter assets would mean that the Greek government was defaulting on itself. It would still have to come up with much of that money or face a total political and economic meltdown.

The private sector can be persuaded to realize some losses on Greek debt, but there is a risk of setting off a Lehman Brothers-like financial panic, especially if there is a judgment of complete or selective default from the credit agencies. Standard & Poor’s warned of such a judgment last week. Big penalties for private creditors may also have weighty implications, because of the potential for a chain reaction — in which credit dries up for Ireland and for Portugal, which ran into fresh trouble when Moody’s downgraded its debt last week. Furthermore, the private sector holds only about a third of the Greek debt total — and that involvement is falling rapidly — so bondholders 

Furthermore, for Greece, such a bailout would not count as a long-term solution. Paying back one’s creditors is not the same as resuming economic growth, and the country would still face the fallout not only from its spending cuts and tax increases, but also from sharing a monetary policy and exchange rate that for it is deflationary. Relative to the size of its economy, the total Greek spending cuts now being contemplated are proportional to the United States government cutting $1.75 trillion. (Even if you believe government needs to shrink, it would be hard to pull off such a big change on short notice.) Right, now Greece’s gross domestic product is falling at a rate of more than 3 percent a year.

Even if a Greek default didn’t wreck broader markets, it wouldn’t cure Greece’s problems. The Greeks are still borrowing, so a default would dry up some of their funds and force the government to make even bigger spending cuts.

If it left the euro zone, Greece could reap the substantial benefits of a currency depreciation, but doing so would also set off huge runs on banks. And the country has no alternative paper currency ready for use.

La carrera del siglo. Lo malo es que tras el pistoletazo de salida, ya a toda velocidad, hay un muro imponente. Incluso yo, ahora, preferiría una huida hacia adelante, hacia una unión fiscal forzada, que lo que se está formando. Es improbable, pero, quién sabe. Ahora mismo, el euro va hacia una explosión que nos va a meter en lo terrorífico. Cualquier anuncio que tranquilizara los mercados -cualquiera- sería menos malo que la caída en precipicio del que no saldríamos. Y pensar que la gente está tan pancha, soñando que lo peor ha pasado, que peor que 5 millones de parados no se imagina nada... ya digo, cualquier cosa, ya. Lo que sea. Hasta que nos gobierno el bueno de RomPuy.