Greece could face military coup says Steven Cordell

While the IMF stalls on its rescue package for Greece, many in the market are beginning to question whether the country would not in fact be better off out of the euro altogether.

But for Steven Cordell, manager of Cazenove’s Pan Europe fund, that is a scenario that should be avoided at all costs.

‘Unless the Greeks are turkeys voting for Christmas then I don’t see an exit for them out of the Euro.’

‘The Greek state employs something like two thirds of the population so the number of losers would be massive.’

He says the reaction of the military is also a significant factor to consider when discussing any potential break away from the Euro for Greece.

‘Spending on the Greek army is amongst the highest per capita in the whole of the EU, so if a plan didn’t materialise you could see a military coup. We’re talking controlled order here and it has happened before in ‘74.’

Cordell says at the moment much of the diplomacy is currently focusing on huge austerity plans, this he thinks is missing a key point. ‘All the talk is about cut, cuts, cuts, “do as you’re told you naughty boy” type thing, but there has been no incentive for the Greeks to create a better future for themselves.’

‘The Greek state is insolvent, we all know that. A debt restructure will have to happen but before that we have to get the European banking system in a solid state so that when a Greek restructure takes place, the banks can absorb that hit.’

Prior to the formation of the Euro, if a country defaulted it was possible to get growth going again by devaluing the country’s currency and then exporting its way out of trouble. However, in a currency union this is more problematic as Greece would first have to leave the Euro, and in order to do this, it would have to default.

The country would then have the option of bringing back the Greek drachma, but Cordell sees little potential in this plan.

‘I don’t see much benefit coming from a reintroduction of the drachma as Greece doesn’t export all that much, tourism is one of its biggest revenue drivers.’

‘We have to have a massive haircut on Greek debt and that’s the price you pay for the Euro. I have a feeling though we’ll still be talking about Greece this time next year.’