Just a short post, inspired by this article by Hamish McRae in Independent – Would it Matter if Greece left the Euro?
So often governments have fought ‘tough and nail’ to stay in an exchange rate system. But, when they finally leave – it is the best thing they ever did, and you’re left thinking – if only they left earlier, it would have saved economic pain. For example:
We don’t really know what would happen if you left the Euro – it is uncharted territory. We can only speculate on potential outcomes. But, perhaps this makes us more conservative and highlight the dangers of leaving.
However, given the Euro has been such an unmitigated disaster for Greece.
- GDP down from $340bn in 2009 to $240bn 2014.
- Unemployment of 25%
Could it get any worse?
In the short-term, quite probably. But, is the short term pain not worth becoming masters of your own economic and political destiny?
Greece may lose out in the short term. But, in the long term it will enable them to have their own currency, own monetary policy and own fiscal policy. This should give better prospects of long-term prosperity and economic stability.
The cost of staying in
Suppose Greece does endure another decade of austerity and finally returns to normal growth. Is there any guarantee the crisis of 2007-2015 will not return, at some point? It is quite likely. There is an inbuilt deflationary bias in the Eurozone. The Greek economy is just very different to northern Europe. Future Greeks may be very grateful, if the bold step is taken now.
My main point is, Greece should take the decision for the next 50 years, not just the next 5 months.