Why would Greece take a complete default rather than a half one-and risk bringing down the entire Eurozone if not the entire global economy with it? To save their country.Īnother potential reason is capital flight.

Everybody can see that an external devaluation will be chaotic, painful and cause its own kind of social unrest, just as the attempted internal devaluation is doing. It is for this reason that, while the Greek CP wants out of the euro, the growingly influential far left parliamentary group SYRIZA does not, and neither does the hard-right religious party LAOS. The real question at issue is a) under whose control and b) in whose interest? Greeks – even those fiercely opposed to Pasok from the left and right – are resigned to the fact that the country faces years of painful restructuring. Most political economists I speak to believe this has been the logic all along, and brave though it has been for Prime Minister George Papandreou to try and buy time to do a proper structural reform of Greece, the implosion of Spain and Italy has robbed him of that time. The euro leaders will be faced with the option of a forced transfer of taxpayers’ money to shore up the entire Greek economy with no surety, and no “local representatives” as currently planned. Key indexes have already lost the gains made Friday and Angela Merkel and Nicolas Sarkozy are once again scrambling to find a way to save the deal. Paul Mason, the economics editor for BBC’s Newsnight, believes that without the bailout and haircut, “Greek debt spirals out of control and the country goes bust.” The vote will almost surely be No-the measure is wildly unpopular-and his government may well collapse before a vote can be held. Greek premier George Papandreou stunned everyone by calling for a public referendum on whether to accept the bailout and the accompanying straightjacket.

But few thought it would explode this soon. Many of us predicted that investor euphoria over Thursday’s Eurozone deal would soon fade.

Digital coin flip