A new chapter in Greek mythology

The final act in Greece's struggle with the Euro has started, in what will surely go down as a new story in Greek mythology.

Since the election of Syriza on a platform of ignoring debts, hoping people will lend money with no expected of being paid back and staying in the Eurozone whilst insulting the Germans, the new Government is demonstrating amazing hope over expectation.

The way the negotiations are going does not really bear out any likelihood that a deal will be done, though many commentators do expect a rabbit to be pulled from the hat. I don't think so. The Greek Government has got itself - quickly - into a position where by to pull back will be a humiliation. They have even asked the German Government to pay reparations for the second World War. Not bloody likely, and insulting to the people who have lent loads of money to the Greeks over the last few years.

The screws are being tightened on Greece whilst they raise the minimum wage, re-hire public sector staff that were laid off, re-open the public broadcaster, and scrap any privatizations. The European Central Bank has closed down a facility for providing liquidity to Greek banks, meaning that funding will have to come from the Greek central bank - that won't last long. In the mean time the stock market is plummeting and withdrawals from Greek banks is continuing at a steady rate.

It will not be too long, possibly the end of the month, by which Greece starts to feel some pain. It will need an emergency loan, and I don't think anyone, other than maybe Russia, will oblige. From there it will be a game of brinkmanship. Will the Greek Government give up, or will the German Government? I think the stakes are higher if the Germans give in. It then paves the way for Spain, Portugal and Irelend to start throwing debt repayments to the wind, and I don't think the EU will countenance Spain leaving.

I therefore think that Greece will be in a full blown crisis by the end of March, with runs on the banks and capital leaving the country. They will shortly have to leave the Eurozone, the return of a new Drachma and then major inflation and pain for the whole of Greece. It will then quickly turn itself around, and maybe Spain will be interested to go it's own way in the end anyway!

And it will be down to some short term choices, just when Greece had started to rebuild.

Let that be a lesson in not to fall for short term gimmicks, sometimes you need to just face the pain.

Squiffy.