Greek politicians know one thing. The country will not be allowed to default.
A Greek default would be an unmitigated disaster for the eurozone, and countries like France and Germany would be hit the hardest because of the large exposure their banks have to Greece.
Furthermore, Greece would merely be the first domino to fall. The resultant pressure on the other eurozone countries in the bond markets could lead to a complete breakup.
Because the Greek politicians know that Greece’s default is out of the question, they no longer have any reason to follow their agreement with the troika. An intriguing pattern is developing whereby the politicians vote for reforms and the bureaucrats summarily ignore them.
Northern tier voters open the newspaper and read that the Greek parliament is approving reforms and austerity budgets; meanwhile the Greek politicians get money to maintain the status quo and the Greek bureaucrats continue avoiding any discomfort by ignoring the law changes.
Even voters resentful of the bailouts do not want Greece to fail and are looking the other way while the circus continues. Up until now, I believed that eventually Greece would default, but now I am not so sure.
What’s to keep the troika from giving Greece drips and drabs of aid indefinitely so that it never defaults but never returns to prosperity either?