GREECE, VERSAILLES AND THE FUTURE OF THE E.M.U.

"No last minute miracle has the Greeks headed to new elections next month. Syriza’s Tsipras appears to believe he has much to gain from a new round of elections. Polls put Syriza in first place, though the margin of error makes it look more like a dead heat with the New Democracy, led by Samaras. Samaras was a significant obstacle to reaching agreements earlier but now has been outflanked by Tsipras. Tsipras apparently did not drink a sufficient amount of the kool-aid that made Samaras more of a realist.

Many observers are confusing the Greek opposition to austerity regime with a desire to leave monetary union. Judging from the electoral results, a majority of Greeks are critical of the EU/IMF/ECB demands in exchange for assistance. However, polls show that 80% or more Greeks want to keep the euro.

There is room to compromise. Can any one doubt, for example, Keynes’ loyalty to the UK even though he passionately warned that the Treaty of Versailles was poorly thought out and would lead to no good? Are not the Greek people saying the same thing as Keynes was saying then?

First, as Keynes noted then, there is a limit on how much people would sacrifice current output to service foreign held debt. Up until earlier this year, aid to Greece seemed to be largely a stealth bank bail out. After the PSI, upwards of three-quarters of Greek debt is in the hands of the Troika (ECB/IMF,EU). They purposely acted to avoid participating in Greece’s debt relief even though, by most accounts, Greek debt was still not on a sustainable path..."

at http://pragcap.com/greece-versailles-and-the-future-of-the-e-m-u