Greece: On the Brink and Counting

The showdown in Europe over past many months seems to have entered the final stage as Athens accused its creditors of ‘pillaging’ Greece for the past five years and insisted it would miss a payment to the International Monetary Fund (IMF) unless it received debt relief.

There are strong reasons for Greece to default, and equally strong not to. The situation will see resolution, one way or another, fairly soon. Though we don’t know which way it will go, we can still try and map the possibilities....

Stable Inflation and Accelerating Industrial Output: Green Shoots of Economic Recovery?

India’s factory output accelerated and inflation remained largely stable, keeping the hopes of a further rate cut alive towards the deep end of the current year.

Consumer inflation remains stable....

The country’s consumer inflation, which is the guiding factor for the monetary policy stance, stood at 5% in May as against 4.9% a month earlier. While the core CPI (which excludes food and energy prices) inched up to 4.6% (from 4.3% in April), prices of food and beverages turned cheaper at 5.1% (against 5.4% in previous month).

Price levels in major categories such as meat and fish, fruits, vegetables and milk products stood at 5.4%, 3.8%, 4.6% and 7.4% respectively. Two major outlier groups are pulses and products, and sugar and confectionery. While the inflation in cereals rose sharply to 16.6% (and has been in double digits for four months in a row now), for the latter category it stood at -7.3% (and has consistently been in the negative territory for most of the past year).

The Reserve Bank of India (RBI), which wants to contain retail inflation below 6% as of January 2016, in its latest monetary policy statement, flagged the possibility of a rebound in crude prices and an adverse impact of a deficient monsoon on farm production as some of the key risks going ahead. A dry spell could fan food inflation, strain household budgets, hamper non-food spending and in process could make it tougher for the RBI to cut rates any further to juice up growth. However, the government has assured that it has enough strategic stockpiles to contain any food price shock, and as a pre-emptive measure is ready to provide high-yielding seeds for replanting of crops. Consequently, in all likelihood, the inflation pressure will be contained below 6% in the current fiscal year.

Factory output growth accelerates….

Industrial output growth accelerated to 4.1% in April, primarily driven by the manufacturing sector that grew at 5.1% as against 2.2% in March. Of the other two sectors mining and electricity, while the former registered a growth of 0.6%, there was a negative growth of 0.5% in the case of latter.

  

According to the use-based classification, growth in capital goods continued to be strong at 11.1% while consumer good returned to the positive territory with a growth figure of 3.1%. Growth in the latter segment had been precariously negative since January last year, with the exception of May 2014, which reflected the reluctance among consumers to spend. However, on a brighter note, capital goods, indicative of investment demand in the economy, rose for the sixth month in a row, indicating a scale up in production on hopes of stronger demand as the economy gathers momentum. Growth in other two categories, basic goods and intermediate goods, remained tepid at 2.8% and 3.3% respectively. The improved investment sentiment and stable inflation augers well for the economy that is expected to have grown 7.5-8% in the fiscal year 2016.

Further rate cut in the immediate future unlikely….

The positive surprise seen in the IIP data corroborates with the solid indirect tax growth figures released by the finance ministry, and thus reaffirms the view that a significant pick-up in economic activity is in the offing. However, a lot depends on how the monsoon unfolds. Approximately, 55% of India’s farmlands depend on monsoon rains and food prices constitute almost 50% of the CPI basket. Thus, the rainfall, its impact on food prices, direction of crude prices, and finally Fed action of interest rates are some of the potential risks that eliminate any space of an immediate rate cut in next couple of months.

Although there is a declining correlation between monsoon deficits and food inflation (2014 being a case in point wherein despite deficient monsoon food prices remained under control owing to timely government intervention), the central bank at the this juncture would rather wait and watch as to how the scenario pans out before deciding on any further action with respect to the interest rate.

Indian States: The New Fulcrum of India’s Growth Push

When the markets are talking of bottom lines and economists about the policy reforms in Delhi, there is a silent but substantial change happening in the background. The combined fiscal deficit of Indian states is expected to decline further in the fiscal years (FY) 2016 even as the country is all set to experience a significant spending push (by central and state governments) in the infrastructure sector. That is, a fiscally public prudent investment boom is under way that is expected to drive the growth momentum at a time when domestic corporate sector remains conservative in its investment plans.

States now account for more than 60% of total tax revenues and spending….

The states' share of taxes collected by the Union government has increased up to 42% from 32%, according to a new formula for fiscal transfer recommended by the Fourteenth Finance Commission (FFC). Consequently, this works out to roughly Rs. 1900 billion (or 1% of GDP) of windfall for states this fiscal year alone. Though budgetary support to state governments have been slashed simultaneously, still in net terms the Centre will transfer (via tax devolution and grants) amount equivalent to 60% of its gross tax revenues to states in the current year. As a percent of total tax revenue (i.e. total gross tax revenue of central and state governments combined), states now account for about 62% of all tax revenues and spending, and the Centre only 38%. And this figure still does not even include coal royalty that some states will receive from recently auctioned coal blocks and a corpus of Rs 285 billion that various municipalities and villages will get from New Delhi over five years. Since, political power hinges on spending ability, this renewed devolution formula has shifted the balance of spending power — and, hence, political power — to state governments.

Total public investment in FY16 equivalent to roughly 4% of nominal GDP, combined fiscal deficit of states to decline to roughly 2.1%....

Of 29 states and 2 union territories with legislatures, 10 (that account for about 42% of total expenditure by States) have presented budgets for FY2016 taking into account these increased transfers. For other states we make plausible assumptions about how the increased transfers will be used based on the expenditure pattern of 10 states that have internalized the FFC's recommendations.

Our estimation shows that on average capital outlay by state governments will be up by roughly one-fifth this year. When combined with Rs 1250 billion worth of infrastructure investment by the central government, the country will experience a burst in public infrastructure investment to the tune of Rs. 5,300 billion, or 4% of nominal GDP this fiscal, up from approximately 3% in FY15.  Further, the figures also show that many states have budgeted to pay down debts which means that with a minimal nominal growth of 11% (i.e. 7.5-8% in real terms), the combined fiscal deficit of all states put together will decline from 2.3% to 2.1% in FY16.

Passing additional string-free resources to states will provide much-needed fiscal stimulus to the economy….

Investments in the economy had been consistently slowing, from 34.7% in the first quarter of FY12 to 30.1% at the end of the second quarter of FY15. The lack of investments was largely on account of stalled projects amounting to Rs 8800 billion or 7% of GDP, of which 80% belonged to the private sector. Since then, the government has undertaken a slew of policy initiatives and two rounds of rate cuts to turn the investment cycle.

To provide a fillip to the economy, the central authorities have already only ratcheted up spending on rail, roads, power and defense in the current budget. But considering the Constitution makes the states responsible for executing everything from power and irrigation to education and healthcare – passing additional string-free resources to states has opened up the possibility for a much-needed fiscal boost to the economy which otherwise was constrained by central government’s fiscal deficit target of 3.9%.

Boost in public infrastructure investment will have multiplier effect and drive economic growth….

The “multiplier” is the ratio of a change in output (ΔY) to changes in government spending (ΔG). The concept of multiplier comes from the fact that when people receive additional income they consume a part and save the remaining. Suppose, people spend 80% of every additional Rs 100 of income they receive, than when the government increases expenditure by Rs 100 on goods produced by agent A, it becomes A's income, of which 80% (or Rs 80) he/she consumes on goods produced by agent B. This means agent B has an extra income of Rs 80, of which Rs 64 (i.e. 80%) is spent on something else (i.e. it becomes someone else’s income) and the process repeats itself. Since, GDP is the sum of all expenditure in the economy (i.e. 80+64+……), every incremental investment has a larger impact than the original amount. In other words, the government spending gets “multiplied”.

Studies have found that multiplier effect is highest and more prolonged for capital expenditure as compared to all other categories of expenditure. For India, estimates of capital expenditure multiplier ranges between 2.45 (NIPFP) to 2.10 (RBI). This means that an increased capital expenditure of Rs 1 by central government would raise the GDP by Rs 2.45 (by NIPFP estimates) or Rs 2.13 (by RBI estimates) in one years’ time. This multiplier effect is as high as 3.84 over a period of three years (i.e. an additional capital investment of Rs 1 generates Rs 3.84 in three years). Considering that the capital investment outlay in the current general budget is Rs 1250 billion, this investment, if fructifies, may generate an additional amount equivalent to 2% of GDP in FY16, and accordingly will have multiplier effect in the succeeding years.

The multiplier effect is also one of the primary reason behind increased resource devolution and hence spending powers to states. According to the RBI study, greater decentralization of government expenditure is expected to have more output effects as compared to the Centre. The study suggests that while capital expenditure multiplier for Centre and states is identical after the first year, it stands at 3.84 for Centre and a whopping 7.61 for states over a period of three years. That is to say, while capital investment multiplies approximately four times for the Centre, the same investment by states multiplies almost eight times over a period of three years. The primary reason for this difference is that while central funds are thinly spread across a range of schemes, state investments are concentrated into few projects thereby generating larger multiplier effect.

Despite the high value of capital expenditure multiplier, infrastructure investments by governments at all levels in recent past have been sluggish. In this regard, increased resource transfers to states together with policy thrust to boost infrastructure spending by governments at all levels is a welcome step that will put India on higher growth trajectory. The financial muscle has been created, the sooner states join the spending race, better it will be for India's economy.

Gold Trends: Micro Diversity, Macro Stability

According to a recent report by the World Gold Council, global gold demand remained stable in Q1 2015. However, there were significant variations across segments and geographies which demonstrates the multi-faced nature of gold market. Please find below some of the key highlights:

Global Market in Balance: The global gold market was in balance for the first three months of 2015 as the top line demand was broadly neutral – down by negligible 1% (YoY).

Variations across Sectors and Geographies: Though conditions varied across geographies and sectors, on aggregate, these differences cancelled out. Weakness in jewellery and other segments were balanced by strength elsewhere (Investments). Similarly, higher volumes in India, Germany and South East Asian economies made up for declines in China, Thailand, Turkey and Russia.

A positive divergence was observed across various categories of investment demand. ETF flows were positive for the first time since Q4 2012 because of improved western investors’ sentiments towards gold. U.S listed products were main beneficiaries but German and UK ETFs too witnessed inflows.

Conversely, investments in bar and coin witnessed a decline, though it is still above pre-crisis levels (between 2005-07 it averaged just 100 tonnes as against more than 200 tonnes now). It came under pressure because of high gold prices (that led to profit booking in Turkey), and because rallying stock markets in two largest consumers of gold China and India (who make up 50% of consumer demand) forced domestic consumers to reappraise their gold buying intentions.

Gold Investment Demand in India at 6-year Low: The bull-run in Indian equity market has provided an attractive alternative to gold investment and investors have taken advantage of a range of better performing assets. Although bullion import has risen 28% (YoY) but it has more to do with curbs and levy imposed on gold imports last year to rein in ballooning current account deficit. The curbs have since been eased, thereby pushing up the quantity of gold imported.

Turkish Demand Lowest Since 2009 as Record Price Induced Profit Booking: The sharp decline in gold demand in Turkey can be traced to dwindling macroeconomic conditions in last two years that had resulted in sharp depreciation of lira. This, in turn, has propelled the local price of gold to near-record levels (prices have climbed to TL100/g during March), inducing profit booking but hurting consumer demand in process.



All You Want to Know About Greek Sovereign Debt Crisis

While the Greek debt crisis has caused global markets to plunge and economies to decelerate, there’s nothing particularly new about this brand of financial collapse.In fourth century BC, the Delian League, an association of 13 city-states that made up Greece, had borrowed money from the Temple of Apollo and hit financial troubles. Dionysius, ruler of the city-state of Syracuse, came up with an innovative solution to the debt problem. He recalled all the money and simply doubled the denomination of each coin, thinking Syracuse would be rich again. Except that it wasn’t. A virulent inflation ensued, wiping out all savings, and the 10 city-state, nevertheless, reneged on their loans with the temple taking an 80% haircut on the debt – the first recorded incidence of sovereign default.

Twenty-four centuries and multiple defaults since, Greece is once again on the brink biggest sovereign default and policy makers are worried about global shock waves of insolvency by a government with a debt of €353 billion ($483 billion) – five times the size of Argentina’s $95 billion default in 2001.

Why is Greece in Debt? The Genesis....

Greece was living beyond its means even before it joined the euro. The membership, therefore, allowed the government to refinance its debt at even more favorable terms – the ratio of net interest costs to GDP fell by 6.5% in the decade after 1995. But the government’s failure to consolidate the fiscal position together with a low interest rate regime fuelled a strong consumption and property related credit boom. Public spending rose 50% during 1999-2007 and the country also accumulated staggering debts by paying for the 2004 Athens Olympics. This spending splurge coincided with the securitization boom in international financial markets which meant money was on call by issuing securities, because markets treated debt of all Euro members identical and indirectly guaranteed by stronger member states. Low retirement age, generous pensions and rampant tax evasion further compounded the problem. 

However, a strong GDP growth of about 4% until 2008 masked the fault lines within the public finances. The public debt ratio declined, not because debt was curtailed, but because GDP in cash terms grew faster than debt, and because government managed the books to meet the fiscal deficit target of 3% of GDP, required of members of the Eurozone. But this did little to cool the economy. Inflation stayed above the euro-area average, hurting Greece’s competitiveness, and thus creating a persistent current account deficit (CAD) that widened to 14.6% of GDP in 2008, meaning the economy increasingly relied on dollar borrowings to finance imports.

The Crisis…

The reliance on short term external borrowing proved costly for Greece when cross-border flows dried up with the onset of global financial crisis in 2007. But shielded by euro membership, it could still borrow easily, if not as cheaply. And there was the European Central Bank (ECB) support in terms of lower interest rate and access to euro and dollar liquidity to withstand the recession. However, by 2009 Greece’s concealed debts were out in the open – actual budget deficit was around 13.6% instead of 3.6% as reported earlier. With falling credibility and rating downgrade, Greek yields began to spike, markets refused to roll over Greek bonds, and the country faced a debt crisis. 

The Troika Therapy: Austerity….

The troika of European Commission, International Monetary Fund (IMF) and ECB provided two bail-out packages totaling €240 billion during 2010-12 to help Greece pay its creditors till June 2015. Apart from these soft loans (i.e. low interest rates and extended maturities), Greece’s private sector and European banks took haircuts on their debts, amounting to approximately €40 billion. But the bail-out was contingent on Greece undertaking structural reforms (privatization, rationalization of minimal wages, generous pension system, tax receipts etc.)  to boost growth, and imposing austerity measures, that involved sharp tax hikes and deep spending cuts, in order to repay the reduced debt by running a primary budget surplus (i.e. budget balance excluding interest payments) equivalent to 3% of GDP. 

The bailout protected the Eurozone investors (particularly banks) from the brunt of default by transferring Greek debts from private to public hands. And even though, officials privately acknowledged that the burden would have to be halved if Greece is to emerge from the economic mire, a haircut of that magnitude could potentially wreck the finances of other members of the bloc.

So while the bailout kept the cash flowing, large scale spending cuts had a devastating effect on the purchasing power and deepened the slump. Yet fearing the consequences of default and eventual exit from the Eurozone the political establishment continued with the austerity program year after year. And when creditors demanded yet more austerity – on a scale that might have driven unemployment to 30% – the nation, in January this year, voted for left-wing coalition Syriza that vowed to renegotiate the bail-out conditions and end the austerity nightmare. 

The Gridlock in Eurozone….

The deep rift between Athens and its European creditors meant that negotiations are in disarray, thereby triggering a state of uncertainty, even as the country races against the time to reach a new financial deal. Primary reasons for the stalemate are:

Differing Demands: Athens, suffering with austerity fatigue, demands more cash but easier terms (a smaller primary budget surplus target of 1-1.5% against 3% being demanded by its creditors) along with a partial rollback of austerity measures. Doing so effectively means a fiscal stimulus, which they claim, will allow the economy to grow more quickly, boost government coffers and thus create a virtuous circle. Consequently, it proposes to exchange outstanding debt with perpetual bonds and growth bonds (repayment linked to future economic growth). But Euro bloc points to insufficient progress on structural reforms promised by the Greek government and hence (due to their own domestic political constraints) insists on sticking to the bail-out terms agreed earlier. Consequently, it has withheld funds (i.e. last €7.2 billion slice of rescue funds and €1.9 billion profits made by the ECB on purchase of Greek sovereign bonds) required to make debt payments looming in next couple of months.

Confrontational Rhetoric: Another sticking point is the dwindling faith in austerity economics in Greece. After some improvements in the macroeconomic fundamentals 2014, the economy has again weakened as reflected by recent slippages in tax collections (January shortfall was €1 billion, 20% below official projection). Thus, the Syriza government beliefs that the austerity programme is hurting their society and has now decided to push back. The creditors on the other hand, encouraged by buoyed financial markets in Europe and by the creation of the firewall (Emergency Bailout Assistance of $800 billion) to tackle future crises, have chosen to take a maximalist position as they believe that Grexit would be manageable for the remainder of the Eurozone. Thus, a resulting confrontational rhetoric on both sides to deflect blame for the slow progress of negotiations has created mistrust. 

Devil or the Deep Blue Sea?....

Comparing the upcoming debt maturities against the fiscal position (i.e. government deposits) suggests that the government may run out of money by June (when the current bailout programme ends). And while negotiations, in all likelihood, will continue until the cash position holds, the former itself may fluctuate depending on various factors like: 

• Additions in revenues through tax    pre-     payment from private sector, clearance of tax arrears or withholding of salaries and pensions.
• The effective level of deposits and liquid assets available in the economy post accounting for     broader public sector. For instance, on April 21, a presidential decree ordered state-owned entities to transfer their cash reserves to the State, which will reportedly raise up to €3.5 billion. 
• The willingness of the ECB to maintain liquidity support to Greek banks against Greece sovereign bonds along with the pace of deposit withdrawals from banks.
• The willingness of the ECB and the IMF to consider a deferral on debt repayments (unlikely). 
• The willingness of the Eurozone members to purchase more of maturing Greeks debts (unlikely). 
• Thus, with the economy fast running out of cash, Athens is teetering on the edge of a default. It has three options, but none is easy.

Option 1: Default and Exit

Greece can never service its debts in full, and in all likely will default, if a bail-out package is not negotiated in next couple of months. So in absence of a deal or debt forgiveness, on whom could, or should, it default? 

It would be suicidal for the government to default on wages and pensions of its citizens. A default on private investors is out of question as Greece desperately needs them to roll over its treasury bills (given it has remained stable so far) and none of the Eurozone loans are due before 2020. Only IMF and ECB are expecting a series of repayments in near term. But then countries have rarely reneged on the IMF and even those who did later ended up paying in full (e.g. Argentina and Brazil). In addition, a default on the IMF would accelerate payment of the Eurozone loans as per the provisions of the bailout. Finally, a default on ECB would have implications for the access of liquidity by Greek banks, which thus means that all roads lead to the negotiating table!

In any case, Grexit, if occurs, would be characterized by the reintroduction drachma (the old currency from 1832 to 2002) as legal tender with an analogous exchange rate with the euro, and conversion of all Greek euro denominated contracts and financial instruments denominated into drachma. A return to the drachma will allow Greece to avoid austerity conditions and control its monetary policy (i.e. ability to devalue its currency). And a devalued drachma, in turn, will stimulate growth through competitive tourism and export sector. For instance, Russia’s economy grew in double digit and Argentina’s by 8% after their decision to default in 1998 and 2001, respectively. More recently, post the financial crisis of 2008, Iceland defaulted on its $85 billion debt, but after a painful transition GDP is finally back at pre-crisis level. 

At the same time, fixing government finances is only the beginning for Greece. It will have to streamline taxation and boost productivity across industries to take advantage of the devalued currency. Not to forget, with little access to credit on bond markets and none from the ECB, a Grexit could cause a bank run (given nervous depositors have withdrawn €25 billion in last three months, a panic caused in case of exit could trigger capital controls like bank holidays, deposit withdrawal restrictions etc., or could even result in outright nationalization!). 

Investors’ wealth will get eroded by virtue of being exchanged into a devalued currency, thereby limiting investments. On top of that, an extremely devalued currency will make imports expensive, create inflationary pressures and eventually restrict production. Thus, exiting the euro does little to solve Greek’s debt problem, it merely takes the problem outside the bloc.

Having said that, Grexit could also take the form of a friendly divorce in exchange for some financial support from the creditors or continued liquidity support from ECB in defending the new currency, or both. Thus, what will finally come out of Grexit is a bit hazy at the point because this will probably be the first example of a country breaking from the union and going back to a weaker currency. 

Option 2: Default but No Exit

Given the maximalist position on both sides, it is quite plausible that Greece reneges on its debts, yet remains in the bloc, thereby causing a domino effect. Investors will get increasingly nervous about the credibility other highly-indebted nations (Portugal, Ireland, Italy and Spain) whose outlook have improved and have recently been issuing debt at extremely low rates. And once mass debt dumping starts, it would seriously strain Eurozone’s $800 billion bailout fund. The problem could get exacerbated by savers and investors moving cash from these vulnerable economies to safer heavens such as Germany or the Netherlands – debt defaults tend to come in clusters!

This would be disruptive for Greece too. The ECB has already threatened to stop swapping Greek sovereign bonds in exchange for cash by Greek commercial banks. And in case of default it may cut off liquidity support to the entire banking system including the central bank. Once collaterals become worthless, and equity wiped out, confidence in the entire banking system will be undermined. Plus there are political costs. Antagonized Eurozone may treat Greece as an ostracized member at the table where other EU-related decisions are made, to the extent that it remains a member at all. 

There is a much discussed possibility that lack of liquidity, post default, would induce Greece to introduce a virtual parallel currency IOU (I owe you), in lieu of payments in euro, along with enforcing tight capital controls to avert any flight of capital. The IOU (coupons with a claim on future government revenues) could be used to settle for domestic expenses (such as salaries and pensions) to free up scarce euro to pay for imports. 

But such suboptimal outcome could spark chaos if people fear that the IOUs will never be cashed. And even if they accept, with little or no access to ECB and bond market liquidity, the experiment will be short lived. International creditors will never accept repayment in a virtual currency and residents receiving incomes in IOUs, while withdrawing their euro savings from banks, will pay their taxes through the same medium. Thus, it would not be long before banks go bust and economy runs out of euros. 

Consequently, the stressed liquidity situation may significantly increase pressure on the Greek government, making snap elections a possibility, which in turn may produce a referendum on complying with the proposed bailout agreement or pave the way for an eventual Grexit. 

Option 3: No Default and No Exit

Renewal of Old Package: In case Greece renews the bail-out package under old terms, locked in a currency union, it will take years of painful austerity to bring the debt at sustainable level and reduce domestic wage to a point where it re-gains its competitiveness on the world stage. Being as member the union, it cannot unilaterally stimulate its economy with monetary policy, like the U.S or Japan quantitative easing program that created new money and injected it into the system by purchasing outstanding debt. 

The Greek economy has already shrunk by a quarter from its peak and some 25% of work force is out of job, resulting in revenue shortfall for the government. And unless a recovery takes hold, the country will slide into deeper financial hole, making the recovery even more painful and tricky. So the Greeks will bite the austerity bullet and pay through the funds sponsored by the troika, and the markets will relax safe in the knowledge that the global financial system would keep on spinning for at least another day.

A New Deal: There is another benign possibility though. Despite the acute level of frustration with Greece’s negotiating stance, an amicable resolution of the current stand-off is a conceivable because, first, support for Eurozone membership amongst Greeks remains high, second, there are many uncertainties that Grexit involves, and finally, an exit would represent the rollback in a process of European integration and would create a dangerous precedent. 

Thus, it is likely that the current negotiations could go down to the wire but an durable new bail-out agreement is agreed upon that includes a mix of structure reform agenda and funds injection (i.e. fiscal stimulus) into the Greek economy, unlike now where much of it is getting recycled into debt repayments. A likely deal could include a relaxation of budget surplus target relative to the existing fiscal position and some relief in debt burden in NPV terms (i.e. through maturity lengthening and interest rate reductions to make loans profit-neutral). In turn, the Greek government could avoid rolling back current austerity programmes completely, show modicum progress on structural reform agenda, and agree to monitoring by troika. 

The longer the negotiations continue, brighter are the chances of a revised bailout deal. At the same time, the ratification of third bailout programme, if agreed, would require unanimous approval from 19 Eurozone governments and their national parliaments, which thus shorten the potential maximum negotiating time available for a deal.

The time constraint, thereby, gives rise to the intriguing yet remote possibility. That, an agreement is reached only after a shock occurs. Such an event could be, imposition of capital controls in response to ECB cutting off the liquidity tap to Greek lenders, Greek government misses a payment/defaults or Syriza government calling for snap elections. The shock would then provide an extra push on both sides to conclude the negotiations and push through a deal. 

Greece is Running out of Time, Money Strategies and Sympathizers…. 

Though the view that the Eurozone would be better off without Greece than with an uncooperative Greece is gaining currency, it is unlikely to be smooth sailing whatever path the euro bloc chooses. Thus, a viable and amicable agreement that inspires confidence in Greece’s economic recovery is still a possibility despite all the barriers and time constraints. It will, however, require a patience negotiation, which unfortunately is in short supply given the pervasive atmosphere of distrust and panic, and in midst of this, there is a lingering danger that one side might cross the red line. 

The monetary confederacy of Delian league did not end well for its nascent central bank (the Temple of Apollo), 2388 years since, will the story be different?