Adrian Hamilton: If everybody's ready for Greece to leave the euro, then it will

 

Share

Is Greece's exit from the euro going to prove the price for keeping the rest in? Until now, European leaders have argued the opposite: that keeping Greece in the eurozone was the only way of stopping a succession of defaults by other, bigger countries. And that is still the received wisdom of Brussels and of Jean-Claude Juncker, the president of the zone's group of finance ministers.

But the mood has changed considerably over the summer. More and more in both the world of finance and the world of government, officials have laid their plans to cope with a Greek exit. Political leaders say it is not what they want. But their advisers are now telling them that they can manage the event.

That may be wishful thinking, of course. A return to the Greek drachma would have consequences for the banking system and financial markets which are very difficult to predict precisely in an internationalised world. Portugal, for a start, might well find the heat turned up on its borrowing ability, even if intervention by the European Central Bank and the use of the eurozone firewall might stop the contagion spreading.

But then the markets might well feel that Greece's collapse would actually help the eurozone as a whole by allowing Europe's leaders to concentrate on the problems of its larger members. Most funds and banks have developed such detailed contingency plans by now that an actual Greek exit might prove a relief.

The difficulty is in seeing any other solution to the Greek problem. On one side, you have a country basically unable to repay its debts, but being asked to make ever-greater sacrifices to meet impossible targets. On the other, you have lenders – not just Germany, but Finland and the Netherlands as well – who are unwilling, and probably politically unable, to let Greece off the hook. The worse the recession becomes in Greece, the more difficult it is for the country to repay its current loans; yet the more often it asks for looser terms, the less faith its creditors have in ever seeing their money back.

It's easy enough to talk of lengthening the period of repayment, but the simple fact is that the voters of Germany will not buy it. Angela Merkel, the German Chancellor, has now gone as far as she can in her insistence on the absolute necessity of preserving the euro. By the standards of the Bundesbank and critics within her own party, never mind the opposition, she has gone well beyond that point.

But if you read her statements, there is a very clear impression that, on the bigger question of the eurozone's future, this lady is not for turning. She is wholly committed to the cause. She is also a politician facing re-election next year. Letting Greece go has obvious attractions as a means by which she could keep her enemies at a distance while continuing with the broader problem of defending the euro.

It won't happen today. The policy for the moment is one of putting off the evil day until the troika submits its report on Greek progress in a month's time. Meanwhile, Chancellor Merkel and President François Hollande, of France – meeting together yesterday and meeting separately with the Greek Prime Minister, Antonis Samaras, today and tomorrow – will try to get the Greeks to make the kind of noises which will keep the German wolves at bay. But unless something extraordinary happens to change Greece's economic situation or the mood of German voters, it's hard to see how a day of reckoning can be postponed indefinitely.

For the sake of ordinary Greeks and the political good of Europe, it would be better if a solution could be found. But the plans for a Greek exit are now in existence and history tells us that once institutions have adjusted to thoughts of the worst, they tend to allow it to happen – even war.

Round two to the Iranians

Bully for the UN Secretary-General, Ban Ki-moon. Despite the demands from Israel and the more discreet pressure from the US, he has insisted that he will be going to the summit of non-aligned developing nations in Tehran next week on the perfectly sensible grounds that it is a group which he can't, given his position, ignore.

His visit, argues an irritated Washington, will give only comfort to Iran as it faces tightening sanctions on its nuclear development. Absolutely right. Given the pressure piling up on the Iranians, Israel's open threats of bombing them and Washington's intense diplomatic manoeuvres to isolate them, of course Tehran is going to try to seek allies where it can. And how better than to put itself on the side of the developing world? Quietly but determinedly, Iranian diplomats have been trying to build bridges in the past months, even with Saudi Arabia.

The Summit of the Non-Aligned Movement, from 29 to 31 August, may prove largely a talking shop. But the US's policy, aided by the UK and the EU, of demonising Iran, is having the reverse effect of making the country seem the victim of Western bullying.

a.hamilton@independent.co.uk

React Now

  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

Recruitment Genius: Senior Digital Marketing Consultant

£28000 - £45000 per annum: Recruitment Genius: A Senior Digital Marketing Cons...

Recruitment Genius: Assistant Stores Keeper

£16640 - £18500 per annum: Recruitment Genius: An Assistant Stores Keeper is r...

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Software Developer - C# / ASP.NET / SQL

£17000 - £30000 per annum: Recruitment Genius: Developer required to join a bu...

Day In a Page

Read Next
The Blue Tit is a strong contender for the title of Britain's National Bird  

If you’re sick of the politcians, vote for a British bird instead

Michael McCarthy
New rules mean individuals will no longer be allowed to register other people in their household  

A political voice that really needs to be heard

Rebecca Armstrong
Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living