If Greece gets kick out,,,I doubt the rest of the Europeans will want to pay off the banks who are owed money by Greece. Also if the Euro goes up,,Germany will suffer as its exports will drop....
http://www.abc.net.au/news/2015-06-25/kohler-theres-good-reason-why-a-grexit-wont-happen/6569832
[h=1]There's good reason why a 'Grexit' won't happen[/h]
OpinionThe Drum
By ABC's
Alan Kohler
Updated Thu at 8:22amThu 25 Jun 2015, 8:22am
Photo: The Greek tragedy is, at heart, about currency wars. (Getty Images: Oli Scarff)
The truth is this is actually just a currency war, and there really is no chance the all-powerful German export machine will allow Greece to exit the Eurozone, writes Alan Kohler.
That the
euro fell on Tuesday when it emerged that the Greek government of Alexis Tsipras may have capitulated to the demands of the IMF and ECB perfectly illustrated what's at stake in the latest EU hoo-ha.
Greece staying in the eurozone equals weak euro; default and "Grexit" equals End of Days for Greece but a strong euro, because a small but heavy sandbag will have been thrown from the balloon.
As a result there really is no chance that the all-powerful German export machine will allow Greece to exit the Eurozone.
It's true that ECB money printing has insulated the European banking system from the danger of contagion in the event of Greek default, but that's not what this is about.
It is, at heart, about currency wars. In the last three months, as Greece looked increasingly likely to miss its June 30 repayment to the IMF and go into default, the euro has appreciated more than 6 per cent.
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That simply will not do. Daimler Benz, BMW, Siemens, BASF, Bayer, and the thousands of "mittelstand" firms that employ 70 per cent of the workforce and contribute 50 per cent to Germany's GDP will not allow the German government to kick Greece out of the euro and cause their businesses to become uncompetitive.
So Greece probably won't have to do very much to remain afloat. The details of the latest offer from Mr Tsipras have not been made public, but apparently he's talking about increasing taxes and pension contributions for companies and the rich.
If so, it will be an obvious sham - a fig leaf. The Greek government is as likely to collect more money from those sources as it is to sell the Parthenon piece by piece, or the Aegean Sea, island by island.
The ostensible demands from the IMF and EU upon Greece for further austerity and reform are so severe that it is a toss-up whether it would be better for it to knuckle under or default and exit.
In fact, these demands are designed for the consumption of the German public, whose opinion of their Greek cousins seems to be a mixture of Verachtung (scorn) and Schadenfreude.
Poll after poll shows that most Germans want Greece out of the eurozone and preferably out of the EU. Reporting a recent poll that 52 per cent of Germans wanted Greece out, Bloomberg quoted a Berlin taxi driver:
They've got a lot of hubris and arrogance, being in the situation they're in and making all these demands. Maybe it's better for Greece to just leave the euro.
In fact, that's the last thing the German export establishment - large and small - will allow; the Greeks just have to be humiliated as the can is kicked down the road again.
The central bank establishment is doing its bit to pile on the pressure: A few days ago the ECB, via the Bank of Greece, issued a statement that said exit from the euro would result in "deep recession, a dramatic decline in income levels, an exponential rise in unemployment and a collapse of all that the Greek economy has achieved over the years of its EU, and especially its euro area, membership".
That is almost as un-central banker-like language as saying that house prices are "crazy".
But that bit of chain-rattling was probably not needed. Tsipras was already capitulating to the extent necessary for the Germans to be satisfied.
One thing is for sure though: Greece is unlikely to be able to fund itself from the markets alone when the current bailout program expires next March. This benighted country will be relying on IMF and EU (that is, German) support for years to come.
In a sense, Germany will have to share some of the current account surplus that comes from having an artificially weak currency, dragged down by Greece and the other Mediterranean basket cases.
The Greek economy should eventually recover because wages have fallen so much, but only if corruption and cronyism can be banished.
As finance minister Yanis Varoufakis told the German magazine Die Zeit:
Why does a kilometre of freeway cost three times as much where we are as it does in Germany? Because we're dealing with a system of cronyism and corruption. That's what we have to tackle.
Alan Kohler is a finance presenter on ABC News. He tweets at @alankohler.
