Beware of Greeks bearing gilts.

With the recent Greek referendum on the bailout package yielding a pretty resounding “no” to further austerity, the Greek-Eurozone crisis is set to move into a new and unprecedented phase. No solution seems in sight to this seemingly intractable and persistent tragedy. The ways forward are all fairly unappetizing to at least one large group of voters. One approach involves some sort of continued and largely European financial support for Greece. Such a solution would represent a considerable climb-down for many European governments, who would likely suffer potentially severe domestic political costs that have just been increased by the Greek government’s negotiating tactics. The other main option is for Greece to effectively declare bankruptcy and, most likely, leave the Eurozone. While it is certainly easier and safer to just sit back and watch how it unfolds rather than try to prescribe or predict a solution to this mess, I am going to instead sketch out what I think could be the outline of a way forward.

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