Monday, June 18, 2012

Grexit followup

The Greek election looks like it will result in a victory for the current ruling coalition of New Democracy and Pasok, rather than for the more radical left-wing party Syriza. I get the feeling from reading various newspapers that there is a feeling of relief around Europe: the idea is that these parties will keep Greece following the austerity path and somehow avoid exit from the Euro, subsequent bank runs in Spain and then Italy, general chaos, global financial meltdown and so on and so forth.

Well, good luck of course. But informed economic opinion seems to be fairly unanimous that Greece will leave the Euro as a matter of necessity no matter whether they remain signed up to austerity or not. At most they will buying themselves a few months, but either way chaos is bound to ensue in Greece.

So this result is not really bad for Syriza at all. Euro exit, when it occurs, will now not be blamed on them, but on the austerity advocates. It is bad news for mainstream political parties, and undoubtedly we have not yet heard the last of the rise of the extremist parties in Greece.

The slow motion train crash continues in slow motion.

(Edit: After writing this I noticed that Paul Krugman says much the same thing on his blog. Probably not a complete coincidence!)

(New edit: So does Tim Duy.)

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