After talks in Brussels last week, the leaders of the eurozone agreed to consider a four-month extension of Greeces bailout package. So far Greeces new government has agreed to honour all its debts, and new finance minister Yanis Varoufakis spent the weekend working on a new list of Greek reforms.
Hes come up with his new proposals slightly later than planned, on Tuesday morning, so well have to what and see what the European Commission, the European Central Bank and the International Monetary Fund think.
But what does this mean for Greece, for the euro, and for the stock markets of Europe?
Backtracking
For one thing, Germanys initial intransigence is in tatters, as it has failed in its insistence that there was no deal to be done and that Greece had to stick to its original terms. Its also an admission that austerity as dictated by Germany is not actually enforceable, and only a short-term sticking plaster on a gaping wound and one that the Greeks can tear off as they wish.
Greeces voters have seen that their country, the cradle of Western democracy, can indeed stand up to foreigners who try to dictate their policies for them. And thats going to encourage the voters in Spain who go to the polls probably in November any agreement on renegotiation by Greece means it will be impossible to deny the Spanish their right to control their own economic and political fate, too.
For the staunch defenders of the euro, last weeks events will surely be chilling their hearts. Mr Varoufakis might be seen as a bit of a lefty radical by some, but hes a smart guy and hell surely do what Greece needs, not what the rest of the eurozone needs.
Not dead yet
In my view, Greece and Spain would be better served by abandoning the euro and even if it doesnt happen in the near term, I see the eventual failure of the pipedream as inevitable.
The short term result for the effected economies will be rapid inflation, an exodus of investment capital, and surely a stock market slump. But exports will become more competitive, and well be back to the kind of genuine free market economics that the eurozone has tried so hard to eradicate but which is in the best long-term interests of the citizens of individual countries.
What should we do?
Where would I suggest putting investment cash while the euro continues its prolonged and painful death-thrashing? Into solid blue-chip shares listed on the UK and US stock markets, thats where, and Id steer clear of companies with excess exposure to the troubled southern european economies at least until theyre out from under the yoke and weve had the correction we need.
And I’d be going for the kind of strategy that has beaten all other forms of investing for more than a century.
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