Once again, Europe’s banking and finance chiefs are hunkered around the negotiating table. The Greek prime minister is optimistic a deal can be reached, the German finance minister dismissive. A debt payment is due; it is two minutes to midnight. The markets are hanging by a thread on the outcome.
Writing the news is getting easy – just cut and paste from the last time a Greek payment was due.
You could be forgiven for assuming nothing has changed, and a deal should be expected in the final hours of the latest crisis. This is at least an empirical approach.
But there are important distinctions to be drawn between the current impasse and previous ones. If Greek equities, Greek bonds and Greek GDP disappeared, it would certainly be a tragedy, but not of epic and globally destructive proportions. And it is more likely that Greece will default precisely because it is now bearable.
It is bearable because the IMF and the European Central Bank now own pretty much every bond on which the Greek government can default. There other holders, but not many of them. By now, each knows the risks.
It is bearable because, while Europe’s equity markets as a whole amount to EUR10 trillion, our broad-based equity index for the region, the S&P Greece BMI, comprises just 39 stocks with a combined free-float market capitalization of EUR $19.7 billion – about two one-thousandths of the former.
It is bearable because the GDP of Greece is now less than 1.5% of Europe’s – an amount otherwise sufficient to distinguish a great quarter of growth from a one of mild disappointment.