6 myths of the Euro / Greek crisis

Author: Eamonn Sheridan | Category: News

From the the Financial Times comes this opinion piece that says there are 6 false beliefs standing in the way of reaching a solution.

Here are the 6 in brief, the full article has more detail here: Mythology that blocks progress in Greece (the Financial Times is gated, but can be read with a free registration)  

Myth 1: A Greek exit would help the eurozone.

If Greece leaves:

  • If Greece suffered a calamitous aftermath, populist campaigns elsewhere would be less effective
  • But euro membership would cease to be irrevocable
  • Each crisis could trigger destabilising speculation

Myth 2: A Greek exit would help Greece:

  • Many believe a weak new drachma offers a painless path to prosperity, but Greece cannot easily expand its production of internationally competitive goods and services

Myth 3: It is Greece's fault:

  • Nobody was forced to lend to Greece
  • Stupid lenders lose money

Myth 4: Greece has done nothing

  • Greece has undergone a huge adjustment of its fiscal and external positions
  • One of the tragedies of the impasse over the conditions for support is that the adjustment has happened

Myth 5: The Greeks will repay:

  • Forgiveness is inevitable

Myth 6: Default entails a Greek exit:

  • It might be possible to run the Greek economy with restricted functioning of its banks. The cash-starved Greek government might make payment with IOUs that it would accept in payment of obligations due to itself. While undesirable, this would be possible.
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