Ioannides and Pissarides are against going back to the drachma. Read their Kathimerini article (in Greek).
If Greece went back to the drachma, the impact on the banking system would be catastrophic, in my opinion. Who would Greek banks borrow from, and how would they get any deposits? Gresham’s law dictates that people will be saving in euros and will be transacting in drachmas, at least outside of black markets. The euros will be hoarded or will be deposited to other European banks. Who in his right mind would be depositing euros in Greek banks if a mandatory conversion to drachmas could not be ruled out completely?
On one hand I hope that the haircut is not a credit event, but if a 50% haircut does not trigger the CDS, I am wondering why would anyone buy heavily into the debt of any country facing a non-negligible probability of default.
Unless ECB pumps liquidity into the system on a grand scale, in the trillions, Roubini’s predictions may turn out to be only a prelude to the real thing. My two cents.
Kato apo tis parouses sinthikes, i Ellada hreiazetai technokrati oikonomologo, i’ dinaton me kapoia empeiria stin politiki, kai ohi ena politiko karrieras me kapoia empeiria sta oikonomika. O telefteos den tha ehei vatheia gnosi ton oikonomikon kai tha endiaferetai gia epanoklogi me sinepeia na min pernei tis apofaseis pou hreiazontai. Einai i ora oi politikoi arhigoi na kanoun tin ipervasi kai na epilexoun tous kaliterous pou ehei o Ellinismos na prosferei, diladi atoma pou na xeroun ti tous ginetai kai einai diatethimenoi na pane kontra sta megala simferonta stin Ellada apo opou kai an proerhontai.
Papadimos’ conditions are reasonable. He is willing to run a coalition government; he is not willing to become a puppet…
Read this article in the New York Times: The Denials That Trapped Greece.
Let’s get this straight: Greece’s European partners should not hold the Greek nation responsible for the PM’s miscalculated or ill-advised political maneuver. The misstep can be handled internally. Let’s stop overreacting and humiliating an entire nation. History taught us that this never led anywhere. The Europeans, of all people, should know this very well.