Your Grexits are here, here, here and here
Frank Underwood has a great talent for managing multiple agendas and recognising everyone’s stake in the game, but even his most well-constructed house of cards could not fall as spectacularly as the Greek economy did over the weekend.
Frank Underwood (Kevin Spacey), in Netflix's House of Cards
So, what happened and what does it mean? Greek Prime Minister Alexis Tsipras removed the first card on Friday. The leader of the radical-left Syriza party who swept to power on a wave of anti-EU sentiment, decided to play that hand once more by deciding to put a bail-out proposal from the European Central Bank to the Greek people via referendum.
For those following the Greek Crisis, the fall-out from this decision was, understandably, swift and brutal. Finance ministers from 18 countries who have much better things to do than meet five times in ten days ins an attempt to sort of the Mediterranean basket-case economy finally decided enough was enough and that their time was clearly being wasted.
Their response was simple and effective. With only three days remaining until Greece was supposed to make its first repayment to the International Monetary Fund (IMF), the European Central Bank effectively cut off Greece’s Central Bank by limiting the amount it could distribute to other banks within the country. This was what caused the huge queues at ATMs over the weekend as citizens realised they would wake on Monday to find the local branches closed.
As Asian markets are the first to open, the European currency is getting absolutely smashed as investors recognise the potential fallout of the ‘Grexit’. The impact of the EU’s iron fortress falling down piece-by-piece terrifies markets that are still in a bearish mood.
So, is the real danger for Greece is that it becomes (for all intents-and-purposes) a de facto of the Balkan economy and is destined to live out it’s days with Georgia and Azerbaijan? For a country that was one of the original members of the European Economic Community (one that gave up the oldest existing currency in the word – the Drachma), it’s an astonishing fall from grace.
However, there may be brighter times ahead. Should the government push forward with more structural reform (while ignoring its crushing debt), the lower costs of the failed state could actually drive foreign investment and lead to an improvement in the day-to-day lives of its citizens. Those looking for an example need refer to Argentina over a decade ago. Struggling with monthly inflation figures of over 10%, it too defaulted, but has significantly recovered to again be a medium economic power id South America.
But who knows what lies ahead for Greece? If Alexis Tsipras shares a common trait with Frank Underwood, it’s that we are yet to see him blink.