Greece would be in much better shape now if it had never joined the euro zone, or if it had been kicked out in 2004 when it admitted that it had lied about its finances to join the club. So would the rest of Europe.
So why not get out now?
One answer is the same one that was given when Greece’s cheating was revealed: Legally, there is no way out. The euro was designed to be the Roach Motel of currencies. Once you enter, you can never leave. There is no provision for departure.
The sophistry in this article is that the lies, the cheating, was “revealed”. Hogwash. Everyone knew what was going on. Including the Greek politicians who stood in line to gobble up the Euro dole.
But, of course, there is a way out. It would be messy, and perhaps disastrous. But no one is going to send an army to Athens to force it to keep the euro.
If Greece were to follow the example set by Argentina nearly a decade ago, it would simply convert its debts from euros into its old currency, the drachma, at the old exchange rate of 340.75 drachmas to one euro. It could also convert euro currency in the country at the same rate. So if you owned one million euros in Greek bonds, they would be converted to bonds with a face value of 340.75 million drachmas.
With a printing press available, Greece could meet those obligations. Of course the drachma would soon be worth a lot less — perhaps 1,000 to the euro. So bondholders would have lost two-thirds of face value…Greece would suddenly be forced to run a balanced budget, or to borrow from its own citizens, whose savings would have lost much, if not most, of their value.
For Greece to pull that off, it would probably have to do it over a weekend, without leaks of what it was planning. If people got wind of what might be coming, there would be an immediate run on Greek banks…
Think there are any Euro politicians who could keep that kind of secret?
…Greece remains woefully uncompetitive in export markets, and there is no credible plan to get its economy growing. The rest of Europe uses the threat of cutting off funds to force more and more austerity on the Greek government.
The message from Greece now may be summarized as, “I’m small. I’ve suffered. You can afford to rescue me. If you don’t, I can create chaos for all of you.”
Part of the earlier spring agreement Greece agreed to included – eventually – a replacement rate of 1 for 10 as civil servants retired. Some of the hacks on board before the government began the hiring tsunami that followed EU membership. Well, 18-20,000 retired who should have been replaced by 2,000 tops. The government hired 24,000.