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Greek Debt Crisis

Pigs do fly

Stephen Beard Nov 3, 2011
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Kai Ryssdal: I don’t know if you remember this, but we started the show the other day by pointing out how there’s never a dull moment in the Greek debt crisis. If I had been smart, I’d have saved that line, because the to’s and fro’s today have been positively dizzying.

At the moment, here’s where it stands. George Papandreou is still the prime minster of Greece — but probably only until a confidence vote tomorrow. The much-criticized referendum on whether to take the bailout is off the table.

As for where things go from here, that’s anybody’s guess. Because for the first time, the two core members of the eurozone — Germany and France — have started to think the previously unthinkable. What’s more, they have been thinking aloud: Spelling out the possibility that if Greece doesn’t knuckle down, or under, to another dose of austerity, it may have to leave the eurozone — like it or not.

How might that go? We asked our man in London Stephen Beard to find out.


Stephen Beard: This is impossible. It cannot happen. Under the treaty that created the euro, member countries can neither pull out nor be ejected from the single currency.

Tim Leunig of the London School of Economics.

Tim Leunig: There’s absolutely no blueprint. In fact, it’s agreed that it will never happen. But sometimes things that will never happen, do happen.

And if it does, it will happen fast. It’ll have to. Greece’s next currency will plummet like a stone against the euro.

Economist Andrew Hilton says unless the government in Athens quickly slaps on capital controls, Greek banks would empty overnight.

Andrew Hilton: Any sentient Greek will pull whatever money he or she has out of bank accounts in Greece and put them into bank accounts in Germany or elsewhere in the eurozone.

Greece wouldn’t necessarily have to print billions of new banknotes, says Gabriel Stein of Lombard Street Research.

Gabriel Stein: Euro banknotes have a national letter in the serial number, so initially the Greek euro re-named the “drachma” will be using the Greek euro note.

However, he concedes, this could trigger a huge cross-border fraud.

Stein: People from other euro countries load a suitcase full of good euros, go to Greece, buy cheap euros from the Greeks and then come back and use them in their own cash machines.

If Greece quits the euro, it’ll be able to devalue its new currency, promote growth, break free from stagnation and austerity. But Julian Pendock of Senhouse Capital says there could be a downside: Hyper-inflation and who knows what else.

Julian Pendock: Whatever happens one can be sure there can be lots of laws of unintended consequences kicking in.

No one knows what, because no one has been blown out of the eurozone before. Perhaps it’s just as well it cannot happen — can it?

In London, I’m Stephen Beard for Marketplace.

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