Greece & EMU: headed for a messy divorce?

If Greece leaves the EMU then the Euro zone will have lost the one single property it has going for it in the markets: the fact that joining it is an irrevocable step. This irrevocable nature of the euro zone membership is the EMU’s most precious asset. Without it the euro zone will look more and more like what many suspect it really is: a bunch of disoriented state-members of a massive confusion.

This is the table on which the Greek anti-troika political forces and Greece’s German-lead European partners essentially poker the future of the continent. The former know that the pack weakens if it drops a member under stress and they use that as leverage. The latter know this is a true but have no choice but to poker trying to find  a way to pull it off or use as leverage themselves. The only way a Greek departure may leave the EMU intact is if Greece leaves voluntarily which can happen only if the EMU can gradually arm twist the Greeks into having no other option. The only way that can work is for the Greek politicians to make silly tactical mistakes (like the ones they are working on now) and legitimize such a practice. In any case it is extremely hard to imagine that the markets will not call the bluff and uncover (and exploit) a forced Greek departure: when a member of the pack defects or is dropped the big bad wolves smell a lone goer but also a loose pack. This is what Romano Prodi captured when he said a Greek “exit would bring down the whole house of cards, with one state falling after another: it would reach Portugal, Spain, then Italy and France”. So are we witnessing a messy divorce here? I don’t think so but as there are no prenuptial agreements in place I think there are way more  stakes on this poker table than a Greek departure should any of the two sides decide to go all in…

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