Do you remember those old Warner Bros cartoons where the coyote has run off the edge of the cliff, but his legs are still turning, and gravity has not sucked him down yet? This is what this week feels like for Greece.
Greece had taken its first step off the cliff when they failed to make the (one before last) payment to the IMF using SDRs. Both legs left the edge last Friday when Tsipras decided not to make another payment, opting to pay the IMF in one go at the end of the month. Pay with what? So long as an agreement is not reached imminently, this is anyone’s guess.
Hugo Dixon offered a good summary of what a compromise solution could look like (see here for full article):
Will such a compromise be reached? Is there time? I think a compromise will be reached, but things are so risky and tight (time-wise) now that the possibility of a Graxident is no longer a theoretical possibility but a real risk.
Mohamed El-Erian stated (see here) that witnessing this dysfunction, ordinary Greek citizens scrambled to do more to protect their dwindling savings. Partial indicators point to continued withdrawal of bank deposits, capital flight and a growing consensus that capital controls will soon be required. Are we really waiting till a full scale disorderly bank run is in order before the gravity of the situation becomes clear? Are we?
I am worried that the government is too busy fantasizing about restoring the relics of Greek statism (like ERT), to notice.