Would a Grexit Be So Bad?

There has been a considerable amount of doom and gloom coming from some quarters about a potential Greek exit from the European monetary union or even the EU (though presumably not Europe itself as the continental shelf likely won't be so easily rid of its historic but troubled peninsula). That so much money, time and effort has been expended in the name of unity suggests that a break up is widely viewed as a bad thing.

There is often a sense that this has much to do with uncertainty, and the disaster scenario is often linked to some manner of contagion theory whereby the exit of Greece, or Grexit, would lead to a domino-like break up of the EU. However, there is another side to this coin, and some believe that an exit could actually be a much more orderly affair. For this minority perspective, check out this CNBC article centered around an interview with wealth manager Nick Dewhirst here.


  1. Anonymous30/5/12 09:08

    The "other side of the coin" is to expect from the financial "markets" (international Funds gambling with the famous - and unchecked - derivatives)to behave rationally and with heart felt care for the interests and financial well being of the peoples of Portugal, Italy, Spain, etc. Also, to not test the limits of the EU funding, towards the remaining weak economies after a Grexit, by starting the pressure on the next in line, who, in the case of Spain, is NOT only the 2% of the EU economy.

    It's not a "we have the money to survive a hit" thing anymore. It's also a "financial markets mentality and way of doing business" thing too. We must also take this into consideration if we really want to have a clear picture of the problem.

    If Greece exits the euro on Monday, the world will NOT fall on our heads on Tuesday (well, maybe it'll fall on the Greeks but who cares). But give it time and, let's say by Friday the news might start becoming ... interesting. And not at all in a good way.

  2. Thanks for stopping by the site, and thanks for your comment.

    If I understand your point correctly, it seems like you are mostly concerned about how a Greek (Spanish, Italian, etc.) exit would impact the citizens, (e.g.'heart felt way') rather than the financial states, of these nations. Some might say they are all one and the same, but I am not sure this is a majority view in the nations under discussion.

    I might point out that I don't know exactly how any of those populations feel about the exit scenario; I don't have the 'boots on the ground' to get a sense of things. I suspect that even if I were there to ask, I might get a different perspective from every individual I spoke to. Therefore, I am not sure I am really advocating for any particular scenario.

    That said, I would say in response to your comment that exit may not hurt citizens of lagging economies as much as you seem to think it will. Revaluation could allow for flexibility and economic growth based around, for example, a rich country fed tourism frenzy.

    If you are taking a purely American viewpoint of the whole thing, I am not sure one scenario or the other would prove to be better or worse than others. I think markets have been pricing in potential failures in the EU for a while now and would look very similar to how they do now after any initial, brief, shock.

    In short, we all know that the financial markets will do what they will in any scenario, including exit. I don't think how markets, in the US or the EU, react should be dispositive of how Greece should be handled.

    In addition, it would be worth mentioning the fact that financial markets have had perhaps an outsized say in how things have gone so far, and have really forced the hands of governments throughout this entire crisis.

    One might agree or disagree with whether that is a good thing, but for one such as yourself who seems to put the human element above all else, it might be comforting to know that whether or not traders are playing with derivatives, governments of troubled nations may have more flexibility in the exit scenario. Again, not advocating one way or another, just some food for thought.

    In any case, thanks for the comment. I am not sure we can solve all of the problems of Europe on this page, but it is nice to see some different opinions of what could happen in exit vs. status quo scenarios.


  3. Anonymous6/6/12 11:49

    Sorry for the huge delay in answering but ... :-)

    So, I'm Greek. I live in Athens. I try to survive for two yrs now with 600 euros per month (1 lt of milk = 1 euro average price and electricity bill around 300 per month). I see my co-patriots looking for food in the garbage and every day I read about another suicide (2 per day the average). I also get insulted in the international media as lazy, untrustworthy, stupid, etc. by people who don't even know where Greece is on the map, let alone really comprehend what violent and harsh austerity really means. I'm afraid that all these can force a person to take the "human approach" either he/she wants it or not :-)

    A German friend once told me that "it's easier to blame others and say who you are not (i.e. "I'm not black", "I'm not poor", "I'm not Greek") than face who you really are and what you're doing about it (or don't).

    I wrote a huge answer for this post, mainly giving "boots on the ground" info about Greece today from the inside. But I won't post it. Don't see the reason anymore. Unfortunately, I truly believe that we are totally alone in this. Until others will join us, that is. And don't even think for a minute that what worked "for us" won't work "for others" too. Faster than the eye can blink and this is experience talking ;-)

  4. Thanks so much for taking the time to come by and post a response. I appreciate your perspective as I think that it does a lot for the general dialogue about this issue to have have Greek voices represented, particularly those who are most effected by the impact of austerity.

    I would be very happy to post your huge 'boots on the ground' perspective as a standalone post if you would like to share your thoughts with my readers. You can send it to editor (at) blawgconomics.com if you would like to.

    I am not sure if it will help rally others to the Greek cause, but it could at least make sure people are better informed about what is happening in the country.


    1. Anonymous7/6/12 07:29

      Thank you very much for the kind invitation. Maybe I'll do what you propose :-)

  5. Also, to my anonymous Greek friend, maybe you could provide a few words on what you think the best outcome of this crisis would be, as well as how you think Greece could get to that outcome?

    I think one of the problems many people have in discussing this topic is that it is just not clear which alternative would be best. While Greeks don't seem to be very fond of austerity, I am not sure they can count on other countries for help (as you said, Greeks may be standing alone at this point).

    That said, if you and the people you talk to on a daily basis could point to one thing to help get the country on the right track, what would it be?


  6. Oh, and finally, good luck at Euro '12...maybe a repeat of 2004 would help lift the spirits of the nation a bit?


    1. Anonymous7/6/12 07:27

      Now, for that I thank you most warmly :-)