First, the situation is very fluid, as the Journal’s headlines demonstrate. One day a compromise is near, the next day Greece and its creditors are back at an impasse. If the way forward were obvious and clear, the parties would have found it by now. For anyone not close to the negotiations (and perhaps even for those who are), predictions are necessarily speculative.
Second, there’s good reason to believe that a Greek default, if there is one, will be manageable. The European financial system is much better able to adjust to default, and a possible “Grexit” from the euro, than it was when Greece’s problems first came to light. In that sense, as we’ve argued before, a default will be allowed to occur only if it doesn’t really matter.
Third, even if a compromise is reached in the next week, Greece is unlikely to disappear from the headlines. The Greek problem is inherently political and will require a political solution, and political solutions are seldom final. Whatever we hear in the next few days, we are unlikely to have heard from Greece for the last time. Timeo Danaos et dona ferentes.
This article was written by Craig Lazzara, global head of index investment strategy, S&P Dow Jones Indices.
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