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After describing getting the Bundestag to pass the necessary legislation to move forward on negotiations with Greece Edward Harrison had some interesting thoughts while giving Schauble his due:

Wolfgang Schaeuble the Salesman

The takeaway here is that we are seeing serious bailout fatigue. It may seem like Wolfgang Schäuble is working against the Greeks by making inflammatory statements. The reality, however, is that he has domestic political issues to contend with. And he needs to make sure that whatever the German government does is seen in a favourable light given the domestic constraints. I think we are going to have a problem then if Greece wants more i.e. a reduction in the net present value of its debt via a derivatives structure like GDP-linked bonds or writedowns. It makes sense to get that reduction because the debt burden is unsustainable. But it is not politically viable in Germany right now, in my view. We could see a default as a result. And that does not necessarily mean Grexit. A politically acceptable outcome is Greece negotiating for NPV reduction, the Germans saying no and Greece defaulting and staying within the eurozone. Greece can say we fought for what was right and Germany can say they did not allow the Greeks to get off lightly; the Greeks simply reneged on their obligations. This is an outcome that is politically viable and one I think has a high likelihood of occurring.


"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Mar 12th, 2015 at 11:33:35 PM EST

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