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People thought the ECB would be Europe's Bundesbank proxy. They were also told Maastricht had no bailout provision. In fact, "risk mutualization" was part of the treaty. Two trillion euros were created to deal with crisis conditions. German taxpayers bore one-third of the cost. At issue is for how much longer?
If it's unable or balks, what then? On the eve of Greece's election, it's unclear who'll win. Will a third run-off be needed? Does it matter either way?
Whatever the outcome, Greece is bankrupt. Its debt is impossible to repay. Increasing it makes things worse. Ordinary people face harder than ever hard times, not relief no matter who's president or controls parliament.
They have three choices - starve, leave, or rebel.
Greece must choose between austerity or default and restructuring, whether in or outside the Eurozone. Leaving is no minor matter. Global economies will manage. Adjustments will be made. They'll take time.
Lorenzo Bini-Smaghi calls Grexit a political and economic nightmare. Leaving the euro, he believes, requires also exiting the EU. Greece could also be sued. He sees a lose-lose situation. Either choice assures trouble.
Citigroup economist Michael Saunders believes Grexit is virtually certain. Perhaps by New Year's day 2013 it'll come.
He "assume(s) that Greece will leave EMU in early 2013, followed by a sharp currency devaluation" and economic contraction. He also thinks contagion will be limited, June 17 election results will be inconclusive, and the Troika will ride to the rescue.
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