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I don't see why the Greeks can't continue to import food and fuel - it will just cost 3 times as much and so a rapid programme of switching to home produced alternatives will be heavily incentivised. No need for a command economy. In practice they will run older cars, and eat less expensive imported branded and processed products.  Is Greece a huge net food importer?  The tourist and property industries should be hugely boosted by the devaluation and could result in a very immediate economic kick start without any expensive retooling required.

I'm also not convinced that a Greek default will totally destabilise the EU banking system - sure some politically unpopular bail-outs may be required, but ultimately a heavy dose of quantitative easing should solve the problem.  (Economists who are dead against QE to save the profligate Greeks and Irish will achieve a Damascene conversion when it is German banks which have to be baled out.

The bailing out of Spain, Portugal and Ireland at affordable rates combined with increased infrastructural investment will also boost the EU economy still further and increase the overall growth rate substantially.

Don't forget the ECB will be blamed for forcing the Greek default and subsequent German banking problems and Merkel will be history - to be replaced by an SDP/Green coalition.  The neo-lib intellectual bubble will have burst and a new generation of policy-makers will come to the fore - ok - 2015 may be a bit early, but these things can happen surprisingly quickly.

BuBa?


Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon May 30th, 2011 at 07:53:07 PM EST
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