It looks like Greece will be kicked out of the eurozone – perhaps as early as this week. Indeed, it is more likely, for the sake of optics, that the Greeks will choose to leave at some stage. If it doesn’t happen this week because there is a deal stitched together, it is likely to happen when the next funding crisis emerges.

Ultimately, the world knows that austerity isn’t working in Greece and is clearly making things worse.

Half of Greek men under the age of 30 are unemployed. The budget deficit is still 10 per cent of GDP, as is the current account deficit. This means that Greece has to borrow 10 per cent of its total income just to pay for imports. The banking system is bust and there is no prospect of recovery. And yet the EU advocates ‘more of the same’ in terms of austerity policy.

As someone clever – either Albert Einstein or Roy Keane – once said, the definition of insanity was doing the same thing over and over again and expecting different results.

This is insanity.

However, it is not just the EU’s economic strategy that has hit a brick wall. Up to now, there was the perception that Greece would at least be treated sensitively.

But beginning with the deposing of former prime minister George Papandreou for the ‘crime’ of suggesting that the Greek people be asked about their own future, there has been very little from the EU bar threats and insults.

It is hard not to conclude that the EU has given up on Greece. We should be careful not to join this cacophony, not least because, if the Europeans can give up on the country that gave Europe democracy – the country that, more than any other, is the cradle of European civilisation – they can give up on anyone.

The EU has to be about more than money, fiscal policy and bond yields. Imagine if the EU had reacted to the fall of the Berlin Wall through the same narrow prism of how much it would cost.

There are bigger things than economics but, for anyone who doesn’t get it, the problem with the current plan is not that Greece will default – the problem is that Greece won’t have defaulted enough. The ‘voluntary’ writedown under discussion with Greece’s lenders will not be anything like enough.

When all this is over, Greece will default on everything by as much 90 per cent. The IMF will then lend it new money and it will start again. That’s what happens – and that is what the IMF is for.

The Greeks are like a big Irish developer that has €800 million of loans on a property portfolio worth €100 million – they can’t pay, so they won’t pay. The money is gone; move on.

The new reality is that the assets are worth €100 million and that’s it. And, in the Greek case, the new reality is that it is totally bankrupt.

Bankrupt economies remain nations, and nations are bound together by more than money.

They are bound together by communal experience – and the Greeks now have no choice but to stand together.

This sense of national solidarity has clearly been heightened by the latest EU ultimatum, which gives the Greeks till Wednesday to sort themselves out.

If the Greeks leave the euro, then what will happen? We will see a massive bank run in all of peripheral Europe because, if this can happen in Greece, it can happen anywhere.

That is the nature of a crisis. It is never controlled. The world moves quickly and the paradigm shifts. Remember the soft landing spoofers in Ireland? When property started falling first, their story was, initially, that ‘this is a buying opportunity’.

Then the falls continued and the story was ‘it will only fall in Roscommon and Leitrim’. As prices fell, the story changed to ‘prime property will hold its value’ and then, when prime property collapsed, it changed again. That’s what happens – once a crisis starts, all bets are off.

Remember, this crisis was caused by over-lending as well as over-borrowing.

It is clear that the Greeks are not innocent, but that is not the point any more. Clearly, the Greeks might not be fond of paying tax, but they weren’t fond of paying tax a few years ago either, when European banks lent to them hand over fist.

So the banks – and the rest of the EU people who monitor – can’t have it both ways.

How can they ignore the Greeks’ errant behaviour when there is money to be made, and then seize on the same characteristics when money starts being lost? Now let’s analyse what has happened in the past few weeks, which has led to a change in the German and EU attitude. The shift in the EU attitude towards Greece – if they don’t ‘shape up’, then Europe will not pay up again – is 100 per cent related to the shift at the ECB.

The ECB is operating a massive operation of injecting liquidity into the banking system, and this could be a central factor in the Greek euro exit. Up to now, the big fear was that, if Greece went, it would prompt yet another credit crisis in Europe. This would cause bank failures and these bank failures would beget yet more economic chaos. This has all changed now.

The ECB will, by the end of the month, have injected €1 trillion of cheap money into Europe’s banks by this new operation, whereby it lends to banks for three years. I can’t stress enough how important this is. It is a giant, monumental ‘cash for trash’ scheme, which is giving banks real cash for brutal collateral at 1 per cent.

This is Europe’s answer to quantitative easing, and it means that, whatever the European banks need, they will get.

There are many ramifications of this which we will come back to in later articles. However, for this week, let us satisfy ourselves that this operation makes the Germans feel that a Greek euro exit could be managed. Why else do you think the Dutch EU Commissioner stated last Tuesday that the eurozone could handle a Greek exit from the currency?

Make no mistake, the elite in Europe are preparing for a Greek exit. They feel they have now enough liquidity in the banking system to handle the shock because, if the Greek exit causes losses in the banks holding Greek bonds, the ECB will at least give them the liquidity to handle the short-term crisis.

Obviously they will take a capital hit, but – as far as the politicians are concerned – this is tomorrow’s worry. We could be in for a huge week.

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