This is one of the most troublesome articles which I have read of late. Particularly since I was told by a reliable Greek source that Mr. Leonidas Chrysanthopoulos, who is quoted in this article, is not a hot head. Instead, he is described as a conservative, intelligent career diplomat.
"At a certain moment, quite soon, there will be an explosion of social unrest. It will be very unpleasant,” Mr. Chrysanthopoulos is quoted as saying. He predicts the spark will be when new, retroactive and sizeable tax bills come due in the coming months that people simply cannot pay. “There will be further increases in armed actions. There will be bloody demonstrations", he says.
Does that sound plausible? To me it does. It might not sound plausible if it were Latvia, Iceland, Ireland or others but I think the case of Greece and Greeks is special.
Greece is still at point 'A' on its path to make it within the Eurozone and, to me, it is certain that once Greece reaches point 'B', things will get better on a sustained basis. To be sure, no economic miracle will occur and unemployment will persist for a long time, but things will get better. I would not expect point 'B' to occur before 2014 (at the earliest).
Can Greece get from point 'A' to point 'B'?
It could, if no accidents happen along the way. Mr. Chrysanthopoulos feels that there are accidents only waiting to happen. Could there be some accident insurance? Yes, the EU could provide it if the EU found a way to support the Greek people without at the same time supporting a failed system. This has certainly not been happening in the last 3 years.
Would a return to the Drachma make it easier? As much as I have always opposed a return to the Drachma (and I still do), I am beginning to believe that this might be the only way out. It could be a defensible strategy if the EU provided 'financial aircover' during the transition period.
Is a return to the Drachma going to happen? I doubt it for the near term. Above all because I am sure that Greece understands that the primary reason why it has leverage against the EU is its membership in the Eurozone which no one can take away from Greece according the EU treaties.
Adding one thing to the other, I conclude that the likelihood of something like a unilateral declaration of default is increasing. If it were handled consensually and not antagonistically, it might have benefits for all parties involved.