Must-Read: Daniel Davies: Groptimism

Must-Read: Daniel Davies: Groptimism: “Well, a deal is done…. And any deal was better than no deal….

…It seems more likely than not that we’ll see a sharp rebound in [Greek] economic growth in Q4…. A lot of the debt service money goes to the ECB and IMF, it’s true, but enough of the outstanding GGBs are owned by Greek residents to make it likely that the fiscal stance right now is stimulative…. The Greek banking system is not broken. Although the branches are closed, the ATMs are limited and capital controls are in place, these are the results of a government crisis that spread to the banks, not a banking crisis that spread to the government…. Flight capital moves both ways…. There is potentially a lot of pent up investment demand…. Greece has spent the last six months living under the shadow of a currency crisis. Of course that affects investment…. Moving Greece away from the edge of the precipice is very likely to have a positive effect on investment spending.

So, if we believe in the national income accounting identity… it very much makes sense to look for a bounce back…. Now… optimism for the near term do[es]n’t all stretch out into the medium term. In particular, the primary surpluses are scheduled to rise, and the new agreement has (stupidly) incorporated a debt-brake sort of idea–a kind of “automatic destabiliser” to cut spending if the surplus targets are missed. So for 2016 and onward, the I and X components might have to take on more of the work, if the Eurogroup turns out to be determined to go through with a bad idea on G…. But, with a bit of good will and good sense, things look a lot better than they did a week ago. The outlook isn’t all bad, by any means.