PERHAPS Congress should get the blame. There have been so many deadlines over increasing the debt ceiling and shutting down the government, that investors have become inured to forecasts of doom. A deal will be done at the 11th hour (or even the 13th) and the crisis will be averted. When it comes to Greece, there have been so many deadlines and so many extensions; the assumption has been of "politics as usual". A deal will be done.
But Syriza was elected on a promise that the Greeks would not suffer "politics as usual" any more. Even today, with a crucial EU meeting in 48 hours' time, Alexis Tsipras, the Greek prime minister, was sounding defiant, proclaiming that the IMF has "criminal responsibility" for the crisis. Depending on your point of view, this is either brilliant brinkmanship (forcing creditors to blink), Churchillian defiance designed to shore up domestic support or foolhardy bluster akin to telling your bank manager "You're detestable. Please lend me a million."
None of this means a deal won't be done at the last minute. But the odds have shifted. Eric Lascelles of the Royal Bank of Canada now reckons the odds of Greek capital controls being imposed are 60% and the odds on default are 50/50. Fund managers polled by...Continue reading
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