The Greek government will almost surely default tomorrow, Tuesday 30 June 2015. Today, the government closed the banks in Greece, imposed capital controls so that money cannot leave the system and closed the stockmarket in Athens. In short, Greece is a mess and threatens to impose a Lehman type financial crisis on the global economy, if not worse.
It is very difficult to say how great of a financial shock this will be to the global economy. But, billions and billions in market value has been lost just in the few short hours since the crisis exploded into its current phase. Eurozone banks lost $56 billion in just one trading day. Those billions in lost wealth could have given Greece a real lifeline to economic growth.
The current approach to the Greek debt crisis is therefore a deeply negative sum game. The losses to the global economy dwarf the costs to fix Greece and the Eurozone in general. The Eurozone should have pursued powerful fiscal and monetary stimulus to repair the Eurozone, not austerity which we now know predictably led to unnecessary pain and misery for the Greek people and the entire global economy.
The IMF, ECB and Eurozone will be responsible for the greatest financial miscalculation in history if they do not act now to reverse their inexplicable and indefensible approach to excessive debt in the Eurozone periphery. They need to give Greece time to determine if there is a potential deal that can be implemented and they need to get serious about growth. Anti-growth austerity must end now. This must occur immediately.
These financial sleepwalkers risk throwing the entire global economy into chaos in a major blunder akin to World War I.