Seven hundred million euro withdrawn in a few hours to resist the impact of the failure. Banks are gradually emptied triggering a dangerous domino in an already collapsing economy. Entrepreneurs, fathers and mothers, unemployed and elderly are the ones who are moving. All terrified by the possibility of losing their savings if the default were to become reality. This is the logic of the mattress (in which, according to folklore, our ancestors hid the money) that prevails over the one of the large banks, of the ruthless finance, of the virtual currency, by many considered the cause of the big crunch, the great crisis of this century. A colossal black hole that has gradually eaten up companies, bank accounts and life and now is about to engulf the cradle of democracy. Despite the Eurogroup’s initial optimism – someone also talked about a reached agreement only to be formalized – meetings ended just with fool’s gold.
The extension for the payment has not been granted and the latest offer that comes from the former Troika sounds like an ultimatum, at which the government Tsipras responded with a referendum. Greeks will decide whether to accept the proposal and then, consequently, to determine whether or not to remain in the Euro. The latest polls do not reward the leader of Syriza – who has asked to vote ‘no’ – and show a “yes” coalition, in the lead with 57% of the votes. But in the situation of panic and chaos that shakes the Hellenic peninsula it is difficult to predict. The only thing you could imagine is what it could happen after the default and the subsequent Grexit. Athens must give 131 billion to the European Financial Stability Facility (EFSF), 54 to the other eurozone countries, 34 to private investors, 27 to the EBC, 21 to the International Monetary Fund and 15 to the holders of government bonds. If the deadline scheduled for June 30 will not be respected, the President of the IMF, Christine Lagarde, will take note formally and this will trigger a “credit event” for the EFSF. In this case, the German Klaus Regling, chief executive of the old Fund bailout (and also of the new, the ESM) will inform the board, which will propose one of three options. The request for immediate repayment (the so-called “acceleration”) is the least likely. The other extreme hypothesis, and so difficult to get, is the “waiver”, that is the choice of doing nothing waiting for developments. In between there is the “reservation of right”, that is the freezing of the situation by reserving the claim of all the rights in progress. This is from a technical point of view.
Economically and socially it would be a disaster, as the government may not be able to pay public salaries and monthly pensions to expire, leaving millions of people without any source of income. A disturbing scenario is the moving of capital abroad and the travel of citizens to bank branches (which, however, is already happening). The specter of a failure of the sovereign state, in fact, takes with it a huge devaluation of the currency, that for Athens would mean a return to the drachma. Which may prompt investors to shift their savings across the borders. To prevent this possibility the government might impose limits on withdrawals, as did Argentina during the default in 2001, when it established a thousand pesos per month as the maximum amount of money withdrawable by every citizen. Finally, the executive would give off the debt restructuring, asking for a new loan to the IMF, following the example of Buenos Aires. In this transitional phase, Greece would remain isolated in the circuit of international finance because considered unreliable.
The Greek failure, as we have seen, could lead Athens to the exit from the Euro, a possibility that is really concerning Brussels. While the jolt of a default could be absorbed without too much effort (“there won’t be storms”, the Italian Ministry of Economy said long ago), the Grexit would be a far more serious matter. Pier Carlo Padoan said clearly that the loss of a partner such as Greece will be followed by immediate action to change the system. “If Athens abandon the euro – he said days ago – monetary union would be no longer irreversible. But we could get through it. And this, in the medium term, adds a possibility to those that currently exist. This would change the prices, if there would be tensions. If we get into a situation in which there is one more chance, the one of leaving the euro, the system becomes generally more fragile and less able to absorb the shock”.
The Grexit represents therefore a strong incentive for speculation to bet on the fact that the euro is not a real political project but only a union of fixed exchange rates among the member countries. There would be immediate consequences on the spread between BTP and Bund, which is currently at the security level at around 120-130 points, but could rise up to 300 or even more. Inevitably the performance of BTP, which is now below 2%, would suddenly rise, pushing up funding costs of our country and thus slowing the economic recovery, and rising debt. An economic doomsday that would cancel a fragile recovery, plunging into the abyss other countries. To avert this hypothesis EU continues to work, relying on the last shred of hope remained, and on the good will of the leaders of Greece, Europe and international institutions. The only thing that seems to lack in this long marathon towards the abyss.
Translation provided by Maria Rosaria Mastropaolo