On Last Friday August 24th Merkel said that Greece was going to stay in the Euro. The New york Times reported ” Merkel Vows to help Greek Stay in Euro Zone”

The French President Hollande said the same thing on Sunday: The Wall street journal reported ” Hollande says Greece Must sta in Euro zone ”

August 27 Merkel added that all of the folks who have a seat at the table just shut up about Greece : The Wall street reported “Merkel Cautions on Critism of Greece” ;- It’s Markel who should be cautious of what she says !!

To “fix” Greece, Greece must decouple from the Euro. There is no other option. It is only a question of when, how much it will cost and whom will pay. The EU deciders know that this is true; they just don’t admit to reality in public. An important question to ask:
How can Mr. Draghi eliminate the risk of convertibility in the EU when the weakest sister in the EU has to be kicked out for its own good? “He can’t”, is the answer. Not when everyone (including the IMF) agrees that sustaining the Greek Euro link is impossible (and harmful to all).
As long as Merkel and Hollande talk nice about Greece, the convertibility issue will hang in the air. The market will continue to fret:

“What happens when Greece goes?”

or

“When Greece goes, does that mean Spain will too?”

The issue of Greece’s status must be resolved before the question of convertibility for the rest of the EU members can be laid to rest. Draghi can’t eliminate the risk until Greece is out, and the resulting fallout is contained.

Draghi is a market savvy guy. He knows he can’t stand in front of the capital markets and succeed unless he has a credible position that can be defended. Greece is the broken wheel of his cart. It has to be jettisoned before the other wheels have a chance to prove they can roll on their own. He says he wants to reverse the market psychology on convertibility risk, that can’t happen until Greece is gone.

The EU political leaders are screaming, “It’s all, or nothing!” That stance takes the cards out of Draghi’s hands.

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