Politicians may be on the beaches but the Euro crisis isn't resting

As it did last summer, the Euro crisis has slipped off the news agenda. Don't be fooled into thinking it's gone on vacation too

No rest for the wicked
Anthony Pickles
On 16 August 2012 14:23

With EU elites, policy makers, and financiers on the beaches this summer, just as it did the summer before the Euro crisis magically slips off the news agenda and as the smell of suncream drifts across the Mediterranean, many could mistakenly think that the crisis was just hyperbole.

Of course, we all know that just as last year, the markets are rounding on the PIIGS and maybe this time even France and Germany.

For the past year, I've had a bet with a friend that Greece will be forced to "grexit" the Euro and reestablish the legacy currency of the Drachma by the end of this year. Midnight on the 31st December to be precise. He thinks that Germany will continue paying to keep them in and that some sort of deal will be bodged together.

I happen to think that he is probably right and I'll be forced to buy lunch as the bet stipulated. I'm not bothered about the lunch, because I like his company – but the outcome I am less happy with.

Greece sees itself as the mother of Europe. Even the very name of the continent comes from Ancient Greek culture. Many Greeks feel that if they are to be economically burdened, they'd rather they be inside the European tent than outside on their own.

Many wonder where they'd go.

When Greece looks around it sees Turkey, its oldest neighbour and foe, with economic growth of nearly 8 percent in 2010 and the perceived threat of Turkey’s success without the protection of the European community directly on their doorstep.

Greece also sees the Balkan countries, themselves seeing through much needed political reforms, and Croatia – a country that will, next year, join the EU in its own right. Could Greece face being the only ones that failed to make a go of it?

Even if my prediction comes to fruition, and lunch is bought for me, why would Greece be on the outside?

This idea that a forced exit from the Euro also means a forced exit from the EU has been spoken about as if it were a foregone conclusion. Many commentators lazily seem to think that, because there isn't a precedent for such a move, a "grexit" must leave them in the wilderness. It would not.

Why would a Greece with the new Drachma necessarily be different from a Sweden in the EU with the Kroner? There would still be free movement of people, of capital, and so on and so forth.

Capital flight and brain drain from Greece is happening as we speak. It has been since bond yields increased to double figures three years ago. When I went to Athens last year I was astonished to find that almost anybody with a modest income knew how to send money abroad and keep it in foreign bank accounts.

When the Eurozone crisis rears its head again in September  many will wonder if Greece will finally be sacrificed by Germany, and whether the bailouts will dry up. But if they do, will they be financially any worse?

Follow Anthony Pickles on Twitter @AntPickles

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