[themartorana]

As I understand it, one of the major underlying issues this whole time (aside from the silliness of trying to integrate Greece's economy with Germany's) was the ECB's refusal to act as the lender of last resort. This seems like an affirmation of that.

If Greece exits the Euro, I wonder if that will embolden other countries to do the same.

[mafribe]

The ECB has effectively acted as a lender of last resort to Greece for a looong time (just look at ELA [1] for example), although for political reasons this fact has been sugar-coated so as not to scare the electorate in states that pay for Greece (and are now beginning to see what has been clear to anyone who looked at the figures, namely that the money is gone!). Greece was effectively bankrupt years ago. The main underlying issue is that Greece has been unable or unwilling (depending on whom you ask) to ensure that tax revenues roughly match government expenditures.

[1] https://www.ecb.europa.eu/mopo/ela/html/index.en.html

[themartorana]

But there aren't many countries in the First World that run revenue neutral or better. The U.S. certainly doesn't, and most countries with fiat currencies and their own central banks don't. I realize it's "possible" in the broad sense, but Germany aside, it's a big ask of Greece (and austerity thus far has done about bupkis to actually deal with the fallout of the financial crisis).

[pjc50]

Greece is now able to run a primary surplus: revenue > expenditure. However, revenue < expenditure + interest payments.

[chki]

I think the ECB is actually not allowed to do that, because Europe (better: The countries of the Euro Zone) is not a debt union. If the Countries were paying for each other regardless of structural reforms, Europe would need to be constructed in a different way (with an actual central government).

To address your other point: I think the horrible situation that will arise in Greece in the following weeks/months will make other countries certainly think twice about getting out of the Euro.

[TheOtherHobbes]

No, if Greece exits then Italy, Spain, and France will be the next to get the treatment. A Grexit will mean the end of the beginning of the end for the EU and a move towards nationalism and/or fascism across the rest of Europe.

Most countries have growing anti-EU nationalist movements, and ass-raping Greece isn't going to make them less popular.

But the IMF have no interest in a strong Europe, because before 2008 European policy was heading in an aggressively anti-corporate direction.

A bleeding and uncertain Europe with a population terrified of poverty and old age is much more to their liking.

Remember total QE lending to banks is the far side of $2.5tn, and most of it is secured against assets that are clearly worthless.

The IMF itself is happy to agitate against austerity when it suits its political aims, and to hand out money that's unlikely to be repaid: see also, Ukraine.

So this is a purely political pantomime. Greek solvency is simply a pretext for political power plays - another attempt to enforce the usual neo-liberal "reform" agenda which aims to destroy the last century's traditions of socially responsible government spending.

[elmar]

If they leave and manage to kick-start the economy that i doubt very much they will manage to do, yes other countries will start to wonder, the next in line is Portugal with the highest speeding in % of GDP of government debt in Europe.