On Monday, we listed out 5 bullet points on what was becoming the new conventional wisdom on Greece.This was based on threads we’d seen here and there from different analysts.
- 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.
Now this exact lining of thinking is being articulated that way in the media by pundits.
Jacob Kirkegaard writes in Bloomberg View that a Greek exit could “make the Euro area stronger.”
It’s basically this: Greece’s upcoming election is a referendum on the Euro, and it could soon be out. That could insite panic, but…
What Europe’s leaders will not countenance is a breakup of the euro. Therein lies the silver lining of a Greek exit. To protect the currency union from the fallout, the remaining members will have to move very quickly toward the economic and financial integration that has always been necessary for the euro’s long-term survival.
And there’s your elucidation of the new conventional wisdom. Grexit + panic = move to fiscal union.
The only question is: How will the conventional wisdom change radically in the next few weeks?