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Varoufakis has a new article up claiming that the German elites have made up their minds to let Greece and Portugal go, push them out of the Euro. He says that the Greek and peripheral governments should not accept and play ball with such a plan However:

Any Greek or Portuguese or Irish government that serves its people's interests would point-blank refuse to play ball. The idea that exiting the eurozone is a simple matter of devaluing is dead wrong. It confuses the correct view that Greece and Portugal and Ireland would have been better off outside the euro with the quite different, and catastrophically erroneous, view that exiting is the optimal strategy. In this sense, our governments have no reason to go along with Germany's amputation strategy. But then again, the Greek government had no reason whatsoever to choose the Bailout Mk2 agreement, and the strings that it came attached with, over a simple default within the eurozone (which I was advocating; along with Wolfgang Munchau). And yet it did. Why? Because the politicians of the Periphery have neither the stomach nor the interest in disobeying orders issued from the North. Why that is is a matter for historians and psychologists. For now, we must take it for granted, unfortunately. Which leads me to the sad conclusion that, even though Germany has no way whatsoever to force certain countries out of the eurozone, the moment the Greek, Portuguese or Irish PMs get their marching orders, they will immediately start marching their way out of the eurozone.


The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Tue Feb 14th, 2012 at 12:14:33 PM EST
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I read that article and I was thinking, what would it really cost them to keep Portugal around. Would it really be that much of a hardship? I don't think so.

There are other reasons to keep Portugal around as well. In addition to its public debt to GDP, it has approximately 130% private debt. if you squeeze the Portuguese too much, some banks in Europe will surely feel it, unlike in Greece where the debt is mostly public and by now written off from many banks and also owned by the ECB.

by Upstate NY on Tue Feb 14th, 2012 at 12:16:40 PM EST
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