The Greek referendum and the hype leading up to it have gone exactly according to my script of 8 days ago, where I predicted a resounding ‘no’ vote and a Grexit to stop the bank-run, with the other European politicians too offended and belittled by Tsipras and Varoufakis to organise another bailout.
The Grexit is now very likely, so likely in fact that Varoufakis’ friend Jaques Delors is writing open letters to European newspapers to implore the rest of Europe not to let Greece go!
To get a good view of what has happened in the last 15 years and what is going to happen in the coming months, let us take the perspectives of three fictitious people: that of an informed Greek businessman, that of an informed Dutch politician, and that of an American commentator.
The Greek business man, February 2015
Syriza has just had its moment with a landslide victory in the elections, getting the population to believe that the Eurozone countries will indefinitely support their pensions and welfare, and allow Greece to not reform in any meaningful way. Party time!
The election after-party was great, with lots of Ouzo and olives, but I know it can’t last. The other Europeans might have seemed gullible to the extreme so far, but even they will not want to be to be hung out to dry in the media like saps, month after month. At some point, the EU countries will stop lending money to anything Greek and ask to be paid back something, whether that is a government, a bank, or a business. How to plan for this, what to do?
Let’s think about what I stand to lose if the Greek government starts issuing that awful Drachma again, worth a fraction of the current Euros.
Firstly, my bank accounts in Greece will halve in value, if not worse. So I am going to take out all the money from my deposits and park it in Northern European banks, or Northern European treasury bills. Moreover, I will give my uncle, the bank manager, a call so as to invite him for dinner and discuss the possibility of taking out a long-term loan with his bank, Euros I will then also park in Northern Europe. When the Drachma is re-introduced, we both know his bank will be in terrible trouble as it simply will not have the Euros to pay depositors what they are owed, but he and I will be doing very well indeed as our loans will be converted into Drachmas whilst our assets are still in Euros in Northern Europe. I am going to get rich from this!!!
Secondly, once the Drachma comes back, my holiday resort will have Greek workers paid in Drachmas and foreign guests who want to pay in Euros. That should work just fine and, since I know my workers will then be paid a lot less, I can start to withhold their pay in the months just before the reintroduction of the Drachmas. I will then pay them later in fewer Euros or perhaps not at all if the mess is big enough and I manage to go bankrupt for the fourth time this decade. All the assets are in my 2-year old son’s name anyway, so I should be able to get away with that trick again. By the same token, I can make a deal with my old school-mate who is now a tax auditor so as to delay paying my taxes until just after the reintroduction of the Drachma.
Thirdly, I am going to have to think about all that German beer I stock for the tourists and thus have to pay for in Euros. There has got to be a way I can use the coming Grexit to have my beer and not pay at all. They don’t trust me at all over there in Germany, which means they insist I pay beforehand, but perhaps I can wriggle out of that if I have to for a few months. Oh, I know what to do: I am going to set up a post-office business in the Netherlands via which I then buy lots of beer with credit, which I then transport to my resort. Those post-office businesses provide a means for American companies to hide from their tax authorities, so why shouldn’t I set one up to defraud a German beer company? By the time they find out what has happened and have traced things back to me, all the intermediary companies will be bankrupt anyway and I will have that beer but no need to pay for it.
Now, what other opportunities will open themselves up? Continue reading