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Greece will have to ‘win ugly’ again

With hindsight, it all peaked at 8.42pm, eight years ago on 4 July.

When Angelos Charisteas headed Greece's winner in the final of the Euro 2004 football championships, he sealed a 1-0 victory over Portugal in its own backyard. Disbelieving Greek footie fans were delirious; the drachma was a distant memory; Greek bonds traded at virtually zero spreads over German Bunds.

Not all fans, however, were over the moon. The Greeks didn't play ‘the beautiful game' - they set out to ‘win ugly'. It was extra time before they squeezed one past the Czechs in the semi final; the defeat of France in the quarter-final was another drab one-nil; even their group games delivered that most anodyne of statistics: won one, lost one, drew one.

The man responsible was German. Otto Rehhagel became coach of the Greek national side in 2001, bringing with him the philosophy of ‘kontrollierte Offensive'. Or, as we might put it in England, stick two big blokes in defence, set up camp around your penalty area and hit them on the break by hoofing the ball to your lone striker.

Unfortunately, while Greek football has built on Rehhagel's foundation, Greek finances have not benefitted from such Teutonic austerity. Now, those zero spreads are the distant memory (they are close to 5,000bps, if anyone is still watching), and De La Rue stock is rising on reports that it is ready to be called upon to print lorry-loads of new drachma.
The crunch has come as failing coalition talks have triggered a second general election in Greece, set for 17 June. The next time I write one of these columns, the euro-zone might be one member lighter - or heading that way fast.

Why do I think so? Where it matters - in interbank and peripheral euro-zone bond markets - there now seems to be relatively calm expectation of the inevitable. The Greek tragedy has not led to a spike in the OIS spread - in fact, it has narrowed from 0.96bps in January to less than 0.40 on 18 May. Spain's yields remain well below 2011 highs, as do Italy's and Portugal's. Indeed, Portugal's curve has corrected from a major inversion at the beginning of 2012. LTRO is doing its job: Greece-centred stress is not spreading to other peripheral yields or revealing systemic stress in the banking sector. European institutions now seem comfortable suggesting resignation about a Greek exit. Most importantly, of course, the Greek electorate itself is throwing its weight behind the anti-euro, anti-austerity Syriza bloc led by Alexis Tsipras.

But unfortunately, the last indicator is the proliferation of commentators, including Tsiparis, dispensing fantasies about a heroic rebound under a new drachma with minimal need for more internal devaluation.

If Greece's footballers have taught their homeland anything, it is that triumph is never easy, and that success only comes from playing according to your resources. It's never popular, but it works.

In or out, if Greece is to win at all, it will have to win ugly.


 

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