Euro

Why Didn't Greek and European Leaders Think About the Inevitable Greek Exit From the Euro Until Three Weeks Ago?

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A time for choosing

There are plenty of horribles contemplated in this Bloomberg piece from yesterday on war-gaming the Greek exit from the Euro, but the subtheme that jumps out at me is how basically no one even contemplated the step-by-step practicalities of this inevitability until about three weeks ago:

The specter of Greece leaving the euro was evoked when ECB executive board member Joerg Asmussen told Germany's Handelsblatt in an interview published May 8 that Greece couldn't renegotiate its bailout terms if it wanted to stay in the euro. […]

The remarks followed elections May 6 that propelled the Syriza party, which calls for reneging on the bailout accords, into second place. […]

"Although such a scenario is unlikely to materialize and it is not desirable either for Greece or for other countries, it cannot be excluded that preparations are being made to contain the potential consequences of a Greek euro exit," the Wall Street Journal quoted [Former Greek Prime Minister Lucas] Papademos as saying. CNBC television separately quoted Papademos as saying there aren't preparations underway in Greece for a euro exit.

This guy saw it coming. You don't want to know what he's shorting these days….

You can blame this stunning lack of foresight on basic incompetence, or a kind of Euro-conformity, where no one (outside of the UK, anyway) dare even to think out loud anything that might be seen as sidetracking the integration juggernaut. But I favor the catch-all explanation that Nick Gillespie and I offered in the opening chapter to The Declaration of Independents: How Libertarian Politics Can Fix What's Wrong With America (soon out in an updated paperback): "Massive, fast-paced change, whether liberational, destructive, or just plain weird, is always and everywhere underpriced." Humans have a hard time grappling with their worlds being rocked, so they just don't.

This tendency, I fear, is playing a big role in U.S. domestic policy and politics right now. Since we can't really contemplate a debt crisis, both parties essentially pretend we'll never have one, and instead propose jacking up federal spending and debt over the next 10 years, a decade during which the eternally predictable Baby Boom retirementpocalypse will be upon us. We can't really imagine the suddenness with which bond-buying sentiment could turn against us, so we keep kicking the fiscal can down the road as if it axiomatically stretches out forever. We can't really imagine America as being anything else but the world's hegemonic policeman, and we really can't imagine being unable to afford that job description overnight, and so the presidential nominee from the party of "limited government" wants to dedicate 4 percent of the national economy to military spending forever and ever, amen.

So, enjoy whatever's Greek for schadenfreude, and know that the planning disaster playing out in Brussels right now is not remotely an event for Continentals only.

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  1. but the subtheme that jumps out at me is how basically no one even contemplated the step-by-step practicalities of (the Greek exit from the Euro)

    We should be surprised by this from the same people who never comprehensively contemplated the step-by-step practicalities of the ill-conceived Euro/EU in the first place?

  2. If only Europe had more regulation…

  3. Unfortunately, when the feces encounters the air circulation device for the US dollar, we are all going to find out that, rather than being “too big to fail”, the US$ is “too big to save.”

    1. As Ive been saying for a few years now, no country is too big to fail.

      Not Babylon, not Assyria, not Persia, not Egypt, not Rome, not the HRE, not the Ottomans, not the British Empire, not the USA.

      1. History is little more than stories about governments bankrupting society.

    2. Rand Paul endorsed senate candidate Ted Cruz just argued the same thing this morning on public radio. I have to wonder when Greece will become a warning to Americans. It sure isn’t now. I’m sick of hearing about cutting “wasteful” spending. A code phrase used by Republicans for not cutting spending.

    3. Not just too big to save, but when we get knocked down several pegs there are plenty of rivals that will be secretly very, very pleased.

      1. There are a few citizens who will be pretty tickled too.

  4. Gosh, it’s very austere in here. It’s too austere. Could we turn down the austerity conditioner?

    1. the UK agrees entering its 2d recession after austerity

      1. How much did spending decline in austerity?

        1. Stop microausteritying me!

        2. It declined in a negative fashion. But a lot of people used the word austerity so it must have happened. Much like the massive de-regulation under Bush that never happened.

          1. It’s like being Cherokee…if you feel austere, you’re austere.

            Boy, more lotion!

    2. Its getting austere in here, so take off all your cloths.

      I am getting so austere im gonna take my cloths off.

      1. We’re here!
        We’re austere!
        Get used to it!

  5. So, enjoy whatever’s Greek for schadenfreude,

    According to Wiktionary, it’s “chairekakia” (well, that’s the transliteration from Greek; Reason won’t let me post the Greek original.

    Why am I doing Matt Welch’s work for him anyhow?

    1. want some more work? is that Tyler Durden?

  6. Greece did not even qualify to enter the euro by the various criteria set by the EU, it was purely a political decision to let them join. Likewise there was never anything in the rules that specified what should happen should a country default, incredibly this was assumed to be impossible once one enters the euro.

  7. Greek for schadenfreude? It’s epichairekakia. I’d include the Greek version, but, of course, the server denies those who wish to promote the classics.

    1. I would have thought nemesis more appropriate.

      1. For some reason, that link to the Google Books result doesn’t work. Anyway, epichairekakia means the same thing as schadenfreude.

        1. And yet, english never picked up a good word or phrase for it. Odd, that.

          1. We own it now. Right of conquest.

            1. Yeah.

              Why build your own word when you can steal someone else’s?

              English is a linguistic kleptomaniac.

              1. We fought two world wars to win the rights to schadenfreude.

            2. We could pick up the greek in the liquidation sale of everything they’re gonna have soon.

              1. I say we move the entire Acropolis to Tennessee for safekeeping. Near Rock City. As a new theme park, Greekarama.

                1. I vote for Athens (Georgia).

                  Somewhere near Rock City wouldn’t be a bad call though. I’d be willing to compromise on Rome Georgia. That’d piss em off even more, wouldn’t it?

                  1. I say we move it to Rome, Oregon. There’s absolutely nothing there. They could use it.

          2. A student in my American Dialects course this past semester suggested that lulz was the English word for Schadenfreude. Seems about right….

            1. The English word for schadenfreude is schadenfreude. It’s actually improper of me to italicize the word. The OED has spoken.

  8. Won’t happen. The bank runs are already a vote of no confidence in the Drachma version 2.

    “A new government may have to respond with capital controls to prevent citizens, faced with potential devaluation of their savings, from withdrawing their money from banks, said Dawn Holland, a senior research fellow at the National Institute of Economic and Social Research in London. Good luck with that.

    1. It is possible that the Europeans will kick them out.

      1. It’s possible, but their rich Aunt Merkel seems to be willing to spend as many taxpayer euros necessary to keep them in. I’m still thinking there’s an opportunity here to be the next George Soros.

        1. Actually, it looks more like her cousin Hollande is more interested in keeping Greece in because his butt is the next one on the line, despite what he claimed when arguing with brother Nikolas.

          Aunt Merkel is losing patience (and her home base) fast. She’s pretty well at her limit now.

        2. Germany can’t rule Europe in a grand and glorious Fourth Reich without Greece. Greece is quintessentially European, and Germans still love all of those classic sites. Besides, where will they vacation if Greece isn’t part of greater Germania?

          1. where will they vacation?

            Spain
            Italy
            France

            Florida.

            1. Naturally, Florida. Everyone comes here. Why half your country is here at any given time.

              1. Actually this weekend marks changeover in the north Florida Gulf Coast. From now until Labor Day, we will be the Redneck Riviera. The rest of the year we are the Canadian Riviera.

              2. Pro Lib: Are you in the FL? Whereabouts?

                  1. Oh. Did you guys win that “home of the official cuban sandwich” pissing contest with Miami?

            2. Nooo! Send them to Turkey!

              1. Canadians? Come, they are our friends.

                1. Even after Avril Lavinge and Justin Beiber?

                  1. The Shat is forever, man.

        3. The voters in Germany are working to stop Merkels propensities. The recent Nordrhein-westphalia election was a big slap in the face to her policies. And without Germany, the Euro experiment comes to a halt.

          1. Not if the entire continent adopts the DM.

            1. Fwiw, I do think German voters at this point would rather Germany pull out of the Euro, rather than go through the painful and expensive process of getting rid of the less productive PIIGS–but then, that would mean that Germany’s exports would suddenly be real expensive again.

              1. Germany is not in a good place. If they continue, subsidizing most of Europe is going to cause them great problems. If they don’t, a lot of trading partners are going to truly tank.

              2. The question is whether the Social Democratic politicans want to pull Germany out of the Euro. (I’d guess no.) There seems to be a huge disconnect between the voters and the political class.

                In Finland, the voters voted in Prime Minister who took a stance harder on Brussels and the bailout. The crowing from their state media organization and the largest national newspaper when Brussels rolled them was sickening.

          2. Those votes against Merkel are mostly for left leaning parties, and they will have no problem softening the euro to keep Greece in, if that does not work they will blame the speculators.

    2. The bank runs are just the rational response to the very real possibility that everyone’s Euros will be taken away and replaced with a currency which will exist solely for the purpose of being devalued.

  9. Matt,

    Of course they thought about it. They have known for months that a Greek exit is inevitable. Remember in a crisis all government officials lie. They will tell you there is no danger of banks failing right up until they do. They will tell you there is no danger of freezing deposits right up until they freeze your deposits. The EU leaders are going to swear there is no possibility of the Greeks leaving the EU right up until they announce the Greek departure.

    1. Also, even though they’ve thought about it, what realistic options do they have? Nobody wants to be the guy who has to stand up and tell the Eurozone they’re gonna eat a shit sandwich one way or the other, so enjoy the taste. The longer they put off telling everybody that, the more they can jockey to not be the guy saying it.

  10. We can’t really imagine the suddenness with which bond-buying sentiment could turn against us, so we keep kicking the fiscal can down the road as if it axiomatically stretches out forever. We can’t really imagine America as being anything else but the world’s hegemonic policeman, and we really can’t imagine being unable to afford that job description overnight

    “Who could have ever imagined using a commercial airplane as a weapon?”

    1. At one point in the not-so-distant-past nobody could imagine there would be no Soviet Union, and then almost overnight, there wasn’t.

      Everything will of course continue as it has, until it doesn’t.

  11. When the English didn’t join the Euro, I figured it was only a matter of time until the collapse. Might take 5 years, 10 years, maybe 20, but it would be inevitable.

    1. Has there been any monetary union that has lasted longer than say 20 years?

      1. The United States.

        Except for that bit of messiness 100 years ago.

      2. A few (the USD being one), but the English are wary when it comes to their currency (paging Mr. Soros, Mr. Soros, please pick up the white courtesy phone), so if their financiers and accountants looked at the Euro plan and said “pass”, it was a pretty clear indication that the Euro did not pass the smell test for long-term success.

  12. Instead of Greece leaving the Euro, the German speaking countries should leave. Then the Greeks and Romans could print their way out of debt like they always do.

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