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What Now For Greece?

April 15, 2010

from Baseline, a great analysis:

The Greeks will now:

  1. Lobby for a large multi-year program from the IMF.  They’ll want a path for fiscal policy that is easy in the first year and then gets tougher.
  2. When they reach the tough stage, can’t deliver on the budget, and are about to default, the Greek government will call for another rapid agreement under pressure – with future promises of reform.  The eurozone will again accept because it feels the spillovers otherwise would be too negative.
  3. The Greek hope is that the global economy recovers enough to get out, but more realistically, they will start revealing a set of negative “surprises” that mean they miss targets.  If the surprises add to the feeling of crisis and further potential bad consequences, that just helps to get a bailout.
  4. The Greek authorities will add a ground game against the European Central Bank, saying things like:  “the ECB is too tight, so we need more funds”.  We’ll see how that divides the eurozone.
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