Grexit would prompt fears of a eurozone break-up but cancelling any Greek debt would encourage anti-austerity Syriza parties elsewhereThe day after Syriza’s victory in Greece, financial markets are sanguine. The euro wobbled but then recovered. The Greek stock market fell, but not sharply. Markets seem to believe that Greece’s creditors and Alexis Tsipras’ party can reach a compromise deal.The outline of an agreement on debt is certainly easy to imagine. Germany, Finland, et al are saying no debt will be written off, and one must assume they mean it. But, as Dutch finance minister Jeroen Dijsselbloem tacitly acknowledged on Monday, it is possible to redefine “debt sustainability” without making an actual reduction in the sum of debt to be repaid. Repayment schedules can be extended and the rates of interest reduced. Alternatively, debt repayments can be linked to GDP growth, an idea some in Syriza have promoted. Continue reading...
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