Greece will stay in the Euro

Wednesday, May 23, 2012 Francisco Carneiro 0 Comments

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To buy time, Europe has substantially raised its official lending to Greece. Including the loans already extended to Greece and the TARGET-2 liabilities, Greece’s EMU partners could be on the hook for EUR350 billion. The longer Europe supports Greece, the bigger this figure grows. Thus, I would argue that the longer Greece is supported, the harsher the shock would be when Greece leaves the EMU. Again, from this perspective, Mr Tsipras’ bet is probably right, that Europe might blink first.

Stephen L Jen (London)

PS I go with Stephen Jen, one very smart guy. I think Europe is already up to the neck in Greek debt (350 b). Germany will blink first. However we could have some more noise until the Greek elections, the market’s don’t like uncertainty.