You have to give Alexis Tsipras props for staging a terrific one-two punch.
He first shows the European task masters that he has the backing of the whole country, so they should stop betting for an overthrow and an easier prime minister to deal with. Then he gets rid of Yanis Varoufakis, the man who stood for everything the creditors' hated. Yanis, unapologetic to the end, rather ungracefully spoke of the pride of loathing the other side. It's certainly the case that Tsipras can say, "Let's see how we do without rancor." But what's more important is that there be a sense of a constructive something, constructive anything -- exit from euro, bank forgiveness, bond forgiveness, whatever.
What should Tsipras do? I think he has to craft a plan that banks on the resilience of the Greek people. First, he tells the EU that he would like to stay and hopes they will help him with a big restructuring, but if they can't -- arguably because everyone other debtor country will elect leaders like Tsipras -- he's prepared to nationalize the banks, guarantee deposits in drachmas (not euros) and start all over again.
I mention the resilience of the Greeks because you have to believe that they have kept some savings during this five-year downturn. There will be credit controls put on, so they are bound to keep those savings there, no doubt forcibly transferred into drachmas. And then there will be a devaluation to end all devaluations where the chief industry of Greece becomes the global winner: tourism.
Remember, this is a country that people would flock to if it costs a fraction of what it used to. They do flock there. My kids took a trip to Iceland after the banks went down -- remember they didn't renege on the sovereign debt -- and all in, at the best hotels with the best guides and airfare it was a fraction of a trip to Disney World. Can you imagine what it would be like going to a nicer place, I mean one with legendary islands and fantastic beaches? Destination No. 1.
That could spur the kind of growth that has crushed Greece where it's been as expensive to go there as any other place in Europe because of the darned euro handcuffs. It's not a panacea. The world does not flock to Hungary with its own currency.
But Greece had been a much-sought-after destination before the crisis and I think it can only be expanded upon exponentially.
So, there are several ways out. The best one for U.S. stocks would be a quick exit from the euro, which would allow the euro to go higher and create an environment where growth, not pain, is now the focus.