Citigroup INc, the lender whose chief economist Willem Buiter invented the term “Grexit” in 2012, has capitulated to the Greek realities. “Grexit is not going to happen, Greece will not leave the eurozone.”
American Nobel Prize-winning economist Paul Krugman fully agrees with the Citigroup even if for another reason: “European Elites are deeply committed to maintain the integrity of the eurozone,” Krugman said during a presentation in Athens on Friday. He added that Prime Minister Tsipras’ “reluctance to take Greece out of the euro had depleted the country’s bargaining power opposite foreign lenders.”
Krugman said also that Greece would be better off outside the Eurozone” that that Tsipras should have been prepared to leave the common currency union.
I want to believe that Krugamn also said that the right momentum for Grexit was in 2010 and not in 2015… But I am not an economist…
“Citigroup capitulates: Grexit isn’t going to happen”
Citigroup Inc. is throwing in the towel on one of its most famous and longest-held calls: It no longer thinks that Greece will leave the euro area.
In a Friday note titled “Removing Grexit from our Baseline,” economists led by Giada Giani explain the shift in their thinking.
“We reckon the political backdrop has changed both in Athens and among creditors,” the economists write, prompting them to abandon a long-standing call that Greece will leave the single-currency bloc within the next three years.
As evidence of the shifting political sands that now render a Grexit unlikely, the U.S. bank says trust is slowly being re-established between Athens and northern European capitals, while domestically the anti-euro Syriza party is losing support to the conservative New Democracy party.
It also says that a new Greek electoral law passed in July will noticeably reduce the risk that a single party will govern the country and decide unilaterally to abandon the bailout program or the euro. In addition, the lingering refugee crisis and political instability on the country’s border in Turkey will boost the Greek government’s leverage.
“Overall, we think the political backdrop both in Greece and in the rest of Europe has progressively become less prone to (or tolerant of) extreme events than in the recent past,” the team concludes.
That said, Citi remains bearish about Greece’s near-term fiscal sustainability in the absence of meaningful debt relief before 2019.
Citi’s Chief Economist Willem Buiter is the person credited with coining the term “Grexit” in early 2012 to describe the departure of Greece from the euro area. At one point, he offered a precise date for when the nation would leave — January 1, 2013. (via Bloomberg)
Retrospectively, I tend to believe that Schaeuble’s offer and temporary Grexit Plan in March 2015, was nothing more than a rhetoric however powerful blackmail tool for the Greek left-wing government to capitulate before the worst scenario that would bring the country in economic and social collapse.
PS Grexit won’t happen, but the unexpected will… the Brexit. BTW I want to know how much money speculators profited between 2010-2015.
Grexit is happening every day for the poor greeks. If they cannot afford to travel to Europe, to buy European goods, they are not European. Slowly, but surely, Grexit will happen.
As analogy: the servant lives in the house, but is not part of the family. Germany will keep Greece in EU, but will use it for its own purposes.
Exactly right Rita. Thanks.
I agree as well Rita.
In addition, everybody in the then government knew that Schaeuble’s offer and temporary Grexit Plan (first half of 2015) was a smokescreen (Varoufakis kept on saying that). What everybody did not know back then was that Alex and his buddies were on the make and were just putting on the act for the masses and the rest of their own party. Their real face appeared after the joke referendum.
Now regarding GRexit, I would reserve judgement after ITexit, which is probably around the corner.