Newspaper article The Evening Standard (London, England)

Expect a Compromise with the Eurozone to Save Face for the Greeks

Newspaper article The Evening Standard (London, England)

Expect a Compromise with the Eurozone to Save Face for the Greeks

Article excerpt

Byline: Anthony Hilton city comment

GREECE is a bit like Scotland with better weather home to a fiercely patriotic people, in a country that has punched way above its weight for centuries past, with a huge influence on the wider world but which now today finds itself painfully lacking in economic clout.

Greece accounts for roughly 0.04% of the global economy, and ranks about 50th in the world. In the context of the European Union, it delivers less than 5% of total GDP. It may be heavily indebted but, according to some imaginative estimates, Greece's balance sheet is only about a sixth the size of that of Lehman Brothers the day in 2008 when it went bust. This does rather put the country's financial problems in proportion, but there is no denying that for a small country it attracts a lot of publicity.

For months now, commentators have been asking what would happen in the markets if Greek voters backed Syriza, a party distinctly further to the Left than most voters in Western Europe have grown used to. Its flagship policy is strong opposition to the inflexible austerity measures imposed on the country by the rest of the eurozone as a condition of its support. Nor should anyone be surprised that it won. Greece has endured a depression as deep as that experienced by the US in the 1930s, with a drop in national output of 30%.

Yesterday the commentators got the answer, but not a lot happened. Shares in most eurozone countries continued to rise, as they have done for some time on the European Central Bank's promise of quantitative easing. The euro fell a bit more on the ECB's threat of quantitative easing. In other words, life went on pretty much as usual. It seems in the intervening months that markets have grown used to the idea of a bit of political discord. The irony is that in economic terms, what Syrizia has been demanding makes so much sense that even the International Monetary Fund seems to agree with it although that may be a mixed blessing, given the IMF's record. …

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