Barring an immediate secession, I anticipate that Greece's 'circumstances' will change in one of two ways over the near term: (1) Greece terms out its loans - a very soft restructuring - in the amount of 30 bn euro (or roughly thereabouts), or (2) the EFSF raises another 30 bn - that's what it's for.
On default, there's a body of literature that attempts to quantify the costs of sovereign default - see the Economist article for a short literature review. Broadly speaking, the true economic impact could be 'short-lived' but is difficult to measure (see specifically this IMF paper).
It all comes down to this: I'm Greece, and I've put through structural reform that gets me a primary surplus next year - why subject the economy to further depressionary austerity measures rather than haircut my creditors and start from scratch? It's been done before (see Table 2 of this paper). Or, I'm Germany (or France), do I want to write a check to Greece? Or recapitalize my banks outright.
On default, there's a body of literature that attempts to quantify the costs of sovereign default - see the Economist article for a short literature review. Broadly speaking, the true economic impact could be 'short-lived' but is difficult to measure (see specifically this IMF paper).
It all comes down to this: I'm Greece, and I've put through structural reform that gets me a primary surplus next year - why subject the economy to further depressionary austerity measures rather than haircut my creditors and start from scratch? It's been done before (see Table 2 of this paper). Or, I'm Germany (or France), do I want to write a check to Greece? Or recapitalize my banks outright.
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