The future of the Euro: - it could all be down to a football match!

Greece to return to the Polls on 17 June: - the day after Greece v Russia in Euro 2012

So it's official, Greece will return to the Polls on 17 June in an attempt to get around the impasse created by the inconclusive general election of 6 May. According to the Sky News Economics Editor, Ed Conway, the latest opinion polls put the "far left" anti-bailout party Syriza at 20.3% ahead of current leader New Democracy (a mainstream party) at 14.2%. If the polls are borne out next month then Greece will be irrevocably on a collision course with the Chancellor (who must be obeyed) of Germany, Angela Merkel. Most commentators then predict that bail out funds will cease and Greece will finally ditch the Euro.

It could all come down to a football match

Greece are scheduled to play Russia in the European Championship finals group stage in Warsaw the night before on 16 June. This fact would not have escaped the attentions of those who are responsible for the scheduling of the election. Apparently the poll could have been held on 10 June. This is a serious point. It is well known that a "feel good" factor benefits incumbents going into elections. Conversely incumbents can expect to reap the wrath of the electorate if sudden "bad news" is received in the immediate period before the election. In the case of Greece consider the "mainstream" parties of Pasok and New Democracy to be the incumbents for the purpose of the forthcoming repeat election.

Two examples: - United Kingdom General Election of 1970 and Spanish General Election of 2004

There are two major examples of "events" perhaps influencing the outcome of elections in modern times. In both examples the incumbent governments (Labour in the case of the UK and the People's Party in Spain). where unexpectedly "kicked out" of office. Of course the events I am about to describe are of a different magnitude in each example. In the UK a football match was influential; however, in Spain it was the deadly terrorist attacks in Madrid on 11 March 2004 and the handling of the aftermath by the incumbent government, which turned the election on it's head.

England played West Germany on 14 June 1970 in the Quarter Final of the World Cup in Mexico. England, of course, where defending champions having beat their opponents but four years earlier in the final on home soil. Expectations were high. The "small matter" of a general election was scheduled for 18 June 1970. The incumbent Labour Party, led by Harold Wilson, was expected to "romp home". England lost the game 3-2 after extra time. Four days later, Mr Wilson suddenly needed a removal van!. Labour found themselves out of power and Edward Heath and the Conservative opposition were in Downing Street with a healthy working majority. None of the polls had predicted this!. It was argued that the "feel good" factor had been damaged by England's loss a few days earlier.

The Spanish example is, of course, somewhat different, people were killed. The lesson though is similar. An incumbent government expecting re-election was out of office as a direct result of an event just a few days earlier. In this example the event had a direct impact on the election. The England game may have been influential in 1970 (maybe even very influential) but it can't in anyway be argued that the football match in Mexico had a direct impact in the manner of the Madrid bombings of 2004.

So what's all this got to do with Greece?

Quite simply Judicial Cat suggests closely following the result of the Greece v Russia football match on 16 June. Should Greece win (and win well) expect a result more favourable to the "mainstream" parties Pasok and New Democracy. Those parties may still not do well enough but things will be close. Should Russia win the night before then your blogger expects a clear reaction the next day. Things are bad in Greece, we all know that. Losing on the football pitch will just reinforce in the minds of the Greek electorate that their nation continues on a "downward spiral". In such an event expect the equivalent of an electoral "blood bath". 

It really will be "all over" and Greece will be heading for the Grexit!

Grexit: - what a Euro mess!

It really is now time for Greece to be "set free" from the Euro

A health warning, Judicial Cat is not an economist. Indeed your blogger's only formal economics "training" took place over 20 years ago as part of a first year undergraduate course. That being said your blogger distinctly recalls some of the more obvious arguments against joining the Euro; when back in 1991 it was still some years away, but even then anyone with "sense" could predict the sort of events we witness today. The sovereign debt crisis may not have been predicted; however, what happens when their is a major disparity between the economies of say a northern European nation such as Germany, and a southern European nation such as Greece certainly where!

Billions just "thrown away"

For the past two years the EU and the IMF have literally thrown billions at attempting to solve the problem in Greece. Yet it remains unresolved. Every few months the political "elite" of Europe announce the latest "idea", which will finally solve the debt crisis. A few weeks later a new crisis then erupts ........ rinse and repeat. Whilst the continent's politicians refuse to face reality the majority of the citizens of Greece live in abject poverty. It can be argued the system in that country has a lot to answer for, and yes it does, but any student of history can see the reality in Greece is now becoming comparable with the days of the Weimar Republic in Germany during the inter war period. The only thing missing in Greece is hyper inflation.

Austerity, the elastic won't stretch anymore

It is ok for Frau Merkel to sit in her Chancellery in Berlin going on and on about austerity like some old "broken record"; however, it is not Germany facing the serious prospect of a breakdown in the social order of it's nation. Already there are reports of soup kitchens in Athens, children being passed to orphanages, as well as suicides. Let's not forget that Greece is a country, which was in the grip of a military dictatorship as recently as 1974. The recent inconclusive elections were conclusive in one respect; namely, the rejection by Greek voters of the mainstream parties of Pasok and New Democracy. So called "fringe" parties where the real "winners" in the election. When Greece returns to the polls (and they will very soon) expect the "fringe" parties to become the mainstream. Those parties, with their mandates, are not going to continue to take lectures from Chancellor Merkel. So either the eurozone and the IMF "back down" and continue to bail out Greece despite that country not following the terms of the bail out, or the money tap is finally turned off and Greece defaults and is forced out of the Euro.

With no mandate from the people to continue the austerity course imposed on Greece then it is obvious that something has to change. The only realistic option is for Greece to leave the Euro.

It might be painful but ultimately it will prove fruitful

Leaving the Euro will be chaotic, it will send "shivers" through every country on the continent. There will be bank runs, exchange controls, border closings and a few unpleasant things besides. That being said Greece will have a new currency and once again be in complete control of their own economy. They will be able to conduct their affairs for the benefit of the Greek people and once again become a fully sovereign state. A new Drachma will float on the markets and Greek exports will become competitive. Indeed the tourism industry will receive a boost from the favourable rate of any new Drachma to say the remaining Euro, the Dollar, or Sterling. A path would have been taken, which will ultimately lead to Greece restoring some national pride and some hope. What happens with the threat of contagion is for the remaining eurozone nations to worry about. The single currency was always a plainly daft idea without full fiscal and political union first. Like artificially created nations, this artificially created currency is facing the same fate; i.e. oblivion.

Remember "Black" Wednesday?

16 September 1992 is described as "Black Wednesday" in the UK. On that date the nation was forced out of the Exchange Rate Mechanism (ERM), the forerunner of the Euro. Despite the gloomy predictions the UK economy recovered and provided years of growth. All this as soon as Sterling was allowed to "float" and not be artificially locked into a "false" exchange rate with the then Deutsch Mark.

Ultimately Greece will leave the Euro so why not get it over with now and stop the further wasting of billions of euros of citizens' money and the breakdown of the social fabric in Greece.