Greeks protest (once more) and burn German/Nazi flags

[ag]

What should be negotiated, of course, is the plan for getting Greece (and, likely, some other countries) out of the euro with minimal pain and suffering. Of course, it is impossible to do this in the open: any hint of such negotiations would destroy whatever is left of the Greek financial system in a second. The problem, though, is, that, in fact, Greece has effectively committed to not negotiating it even in secret, by installing a "technocratic" PM. Even if we forget that Papademos was the one who engineered Greek entry into the eurozone (and is unlikely to give up his major achievement without a fight), he cannot, really, make such a fundamentally political decision.

[ag]

Letting the bankers or the military know anything in advance would be a disaster. The parliament should be called into a closed session no earlier than at 8 PM on a Saturday (once the agreement between Papandreu and Samaras is reached). Hopefully, by early morning all the necessary legislation could be adopted. It's only then, once drachma is the sole legal tender, that anybody should be notified. In any case, bankers can only be informed simultaneously with the announcement of a bank holiday. It is, probably, impossible to print the drachma in secret: don't do it in advance. For a few days, until a provisional currency may be circulated, I'd suggest allowing only domestic electronic transactions (in drachma). To help the poorest, the staples should be available from the government.

And, of course, quitting EU is out of the question. Temporary border controls may be imposed, but only briefly. It is indispensible that Greece stays in the EU and is helped out  by the other members. That's why, Merkel would have to agree to this first.

[ag]

Why the hate on Papademos? He's only the head of Greece's for-show-only Mock Government. It's not as if he has any power...

No hate. Though, of course, he does deserve some: he was actually the one, who engineered Greek entry into the eurozone. It's his mess, to a large extent.

[ag]

There's nothing democratic about the way Papademos was inserted into power.

I thought, he was approved by the Parliament.

[ag]

There's nothing democratic about the way Papademos was inserted into power.

I thought, he was approved by the Parliament.

I don't think that's what he meant.

And that's exactly what I meant ))

[ag]

EU rules prohibit capital controls. If Greece attempted to exit the EZ without capital controls, there would be no way to introduce a drachma-based banking system without having the existing one wiped out. There goes the entire Greek money supply and savings of the Greek people. Think you've seen riots now? Also, Brussels has vowed to kick Greece out of the EU if it exits the EZ. I thought the decision was shortsighted at the time.

That's why Greek exit from the EZ should be negotiated w/ EU partners. Leaving EU would be a disaster.

[ag]

Thinking through this scenario, it doesn't work. The best path for now is that Greece will continue to go bankrupt but remain in the euro zone. Germany will not kick Greece out, and Greece is not yet ready to leave. But they can continue to write down their debt, if at this point it triggers the CDS event, this can be contained better than an exit of the EZ.

The consequence of this could be either some sort of a Communist revolution or a military coup. And then the exit from the EZ will be managed by some sort of a Revolutionary Council of National Unity. You REALLY want that?

[ag]

There's really no reason to devaluation-default anyway - it has all the negatives of a normal default and more.

The alternative is Greece deflating into competitiveness. Will they manage it?

[ag]

Are you able to just wave a wand and turn all your euros into drachmas?

The ones in the bank - sure. Cash - well, it will stay stuffed in matrasses till the judgement day, I guess.