Is it so bad to leave the Euro?

Leaving the Euro is supposed to be irreversible. If a country did threaten to leave the Euro – it was argued it would lead to bank runs, loss of confidence, high unemployment and a serious recession. But, what if you already have all of these components? The Greek economy is in dire state. Furthermore, their …

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Greece could benefit from leaving the Euro?

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 …

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Greece austerity

Greece is a very good example of the damage of austerity can do to both economies and the social fabric of a country. Firstly Greek austerity is almost unprecedented in its scope and intensity.

Greece government spending and revenue

greece austerity
Source: Statista

Greek government spending was cut from €120 bn in 2008 to €90 bn in 2014.

To put that into context – the UK years of ‘austerity’ have seen government spending rise from to £522bn in 2007/08 to £722 bn in 2013/14 (UK government spending)

To cut government spending by 25% in nominal terms is quite rare. In addition, the Greek economy was also saddled with other difficulties which have contributed to lower economic growth.

  • Due to higher inflation rates, Greece experienced a decline in competitiveness . Because it was in the Euro it couldn’t devalue and this led to a large current account deficit – lower exports and reduced domestic demand.
  • No control over monetary policy. The ECB increased interest rates in 2011, and have, until very recently, rejected any form of quantitative easing to help boost domestic demand in southern Europe.

Cost of Austerity

The cost of this austerity has been enormous in terms of economics, social and political upheaval.


Source: wikipedia

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