The Greek crisis was basically a story that started last year on Thanksgiving (when Dubai World defaulted, and everyone started asking who the next would be to go), and ended last Friday, when Greece floated a bond, and it became glaringly obvious that despite their negative public postures, the leaders of France and Germany had given their banks the wink-wink promise of a bailout, and the green light to keep buying Greek debt.
So the story is over for now, though we reserve the right to revisit the situation at any time, and acknowledge that as soon as this summer, European sovereigns could run into funding trouble again. Heck, it could be sooner. After all, it looked as though the US crisis was in a sense “over” after Bear Stearns was bailed out (kind of) and all banks got access to the discount window, a life valve that proved ineffective.
Europe may yet get its Lehman (the new suave pick for that is not Spain, but Italy, btw).
But even if it doesn’t, and the Europe story goes away, it doesn’t matter, because of the ramifications of Greece will be enormous.
Greece set in motion what was inevitable: a merging of European treasuries, a natural move in light of a single central bank. There will be more revenue sharing, a more harmonic Europe-wide economic policy regime, and the end of sovereignty. It will also boost the power of Germany and France as the real leaders of Europe.
And, here’s a big one, Greece laid the first brick in the road to giving Angela Merkel a euro-wide army under her (or her successor’s) control.
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