Wait and See
In a moment of chaos, in which it is very difficult to even simply make sense of actual events, it becomes almost impossible to formulate forecasts. I would not be able to bet on grexit (or porxit, spaxit, itaxit, for that matter), in one sense or in another. I just wait and see.
A few things seem to be changing the broad picture, with a mix of encouraging elements, and added uncertainty.
Fact number one: The new French president is acting as a catalyst for those who are unhappy about German-imposed austerity. Yesterday’s informal council meeting, disappointing as usual, shows that Hollande has the strength to at least impose the discussion of his themes to reluctant Germans (for example the eurobonds). But it remains to be seen whether him and his newly found supporters will be able to force implementation of the measures they advocate for.
Fact number two: Growth is back to the center of the stage. Contrary to some weeks ago, there seems today to be more debate. The surrealist discussion on the salvation that would come from structural reforms seems to have disappeared, hopefully eclipsed by its many inconsistencies. Even some hardliners like Mario Monti today, accept that growth through austerity and through structural reforms may need to be complemented by short term stimulus. Not enough, but, like eurobonds, at least it is on the table.
Fact number three: The uncertainty surrounding the new elections in Greece, and more importantly, the reaction of European partners if a coalition unwilling (or incapable) of respecting the engagements emerges. If anything emerges at all…
I could continue with facts four (the ratification of the fiscal compact and the Irish referendum), five (Spain, its spreads and the effects of austerity), six, seven, and counting. But I think I made my point. Somebody could have said There are more sources of uncertainty in heaven and earth (and in the eurozone), Than are dreamt of in our economics textbooks.
This comforts me in my choice to devote a big part of the first class of the year (no matter what the topic is), to warn my students against the truth-bearers. These are particularly numerous in the fields of macroeconomics and economic policy making. Teaching skepticism towards those who know-it-all is therefore my main objective as a teacher. And it seems a wise strategy, increasingly so, also as a European facts commentator.
Accordingly, for the moment, I observe. Wait and see…