This Is The New Conventional Wisdom On Greece

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Photo: Andrew Mason, Flickr

It’s clear from reading various analyst/strategist notes, and listening to investors that a new conventional wisdom is starting to harden on Greece.Conventional wisdom is often wrong and it frequently changes, but it’s useful to know what it is at any given time if for another reason than that you know what is a surprise and what isn’t.

Here’s a few quick bullet points on how minds are melding these days.

  • The next Greek election is basically a referendum on the Euro. Germany/France have given Greece an ultimatum: If you don’t elect a pro-Europe guy, then you’re out.
  • Assuming Tsipras wins, the ECB will face the biggest decision in its history: Whether or not to cut Greece’s central bank off from borrowing, effectively forcing the country out of the Euro.
  • If Greece is forced out, that will cause major deposit flight in Spain/Italy.
  • The ECB will counter with a mammoth wall of liquidity.
  • Once Greece leaves, the work towards achieving Eurobonds/fiscal union, etc. can really begin.

Again, that’s just the memes going around now.

It’s subject to change in the next few days (or hours).

For more on some of these ideas, see Jim O’Neill here >

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