There is a chance that Greece may have possibly, hopefully, cross your fingers passed through the worst of its nightmare. From the FT
The new mood is bolstered by positive signals in official economic statistics. Latest figures suggest Greece is on track for modest growth of 0.6 per cent next year after a six-year recession that has seen national output shrink by almost one-third and pushed the jobless rate to a record 27 per cent.
Even though the economy is still shrinking, the annualised pace of contraction slowed from 5.7 per cent to 5.3 per cent in the first quarter, according to Elstat, the independent statistical agency, in line with official forecasts for a full-year decline of 4.2 per cent.
The article notes that if things continue going as planned they should achieve a primary budget surplus of around 0.5% of national output. I suppose I’m obligated to note that such a surplus is partly a function of an improving economy, partly the result of austerity measures and probably to a larger extent a result of the fact that their debt load was substantially lightened via default. There isn’t really a place for an austerity versus stimulus debate here, the simple fact is that the Greeks had a lot of other people write off debts that they owed. Throw some structural reform and subsidized financing from the EU into the mix and voila´, comeback.
So do they other EU basket cases take any lessons from what might be a Greek turnaround? Well, if you buy my argument that the Greek turn is mostly a product of default then I guess the answer is we’ll have to wait and see. How long they can muddle along with super-high unemployment and recessions bordering on depressions without the rank and file storming the gates is problematic at best. It becomes even more so if the Greeks start living some semblance of the good life once more. Deleveraging at a certain level of debt is a fools errand; a reality that the Greeks may have recognized some time ago. They may well have played this particular hand of poker better than most of us give them credit for and it remains to be seen if the others learn a lesson.
The Germans and their minions in Northern Europe probably ought to cut to the chase and ask themselves if the pain a Club Med default will cause them is less than the pain they would incur by walking away from the EU. The current path is leading nowhere, the Greek path seems to promise results.