Forget game theory or economics, Greece’s future depends on emotion | Paul Mason | Paul Mason

The Greek aim is to get a strategic deal on the debt, and to avoid a short term bank collapse and default – but they can only do this by taking their negotiating partners to the brink.

If negotiations fail, and Grexit happens, I would expect the sequence to be:

(i) Failure to agree a bridging program triggers more rapid capital flight

(ii) ECB signals decisively it will pull Emergency Lending Assistance, triggering a bank run and bank closures, probably between 18 February and 28 February,

(iii) Capital controls, with Greece effectively operating as semi-detached member of the Eurozone;

(iv) default on debts to European sovereigns as they come up for refinancing

(v) the possible issuance of alternative currency, or paper acting as such in the banking system.

via Forget game theory or economics, Greece’s future depends on emotion | Paul Mason | Paul Mason.

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