Enough is enough: it’s time for Greece to leave the Eurozone
Enough is enough. It’s time for Greece to leave the Eurozone and start issuing its own currency.
European leaders have confronted the Greek government with a draconian package of austerity measures entailing a surrender of fiscal sovereignty as the price of avoiding financial collapse and being ejected from the single currency bloc.
A weekend of high tension that threatened to break Europe in two climaxed on Sunday night at a summit of eurozone leaders in Brussels where the German chancellor, Angela Merkel, and President François Hollande of France presented Greece’s radical prime minister, Alexis Tsipras, with an ultimatum.
Someone pointed out that the problem is that Germany has too many lawyers and not enough economists, and this leads to a different mindset. Several people have pointed this out, and it is summed up in this article: A Lawyer’s Mindset Where An Economist’s Is Needed? – Forbes:
A Twitter correspondent pointed out a simple fact that makes Schäuble’s inflexibility in negotiations with Varoufakis explicable: though he is a Minister of Finance, his PhD is in law.
So is he implicitly approaching these negotiations as a lawyer would? Because from that point of view, what the Greeks are trying to do is to renege on a contract. And for a lawyer, changing the terms of a contract after you have signed it is a no deal. It’s either carry out the contract, or I’ll sue.
Varoufakis, of course, is approaching the negotiations as an economist. From his point of view, the terms of the Troika’s package are a set of economic policies that have failed. And if policies have failed, the sensible economist tries different ones.
And some have pointed out that this difference in approach is rooted in theology: The moral theology of the Greek crisis – Spiritual Politics:
… behind the moral standoff is a difference in approaches to human error that has divided Eastern and Western Christianity for centuries. It’s the difference between the Orthodox idea of economia and the Augustinian conviction that either it’s right or God brings the hammer down.
Economia recognizes that while all warfare is bad, sometime people have to fight and then get to repent for it. Augustinianism sees wars as either just or unjust. Economia recognizes that while divorce is bad, sometimes a husband and wife have to split up and they then get to remarry (somberly, no more than twice) and remain Christians in good standing. Augustinianism says no to divorce, and no to communion for those who remarry.
The current impasse seems to show that the differences between these two approaches are irreconcilable, and perhaps it is time for a divorce.
The most sensible suggestion that I have seen comes from someone known to me only as “Whiskers”, who said:
Greece could (should, almost certainly will) leave the Euro and revert
to its own currency, without leaving the European Union. Britain never
joined the Euro but is otherwise a full member of the EU – so when world
financial systems began to go haywire at least Britain retained control
over its own currency, including exchange rates and money supply.
Greece, starting from a much weaker base, surrendered such control and
is now unable to manage its own affairs.Greece is not a poor country, what they lack at present is not wealth
but currency – they have literally run out of banknotes (not helped by
people hoarding as many as they can at home) and the Euro rules mean
they can’t print any more; they have to get them from the Euro Central
Bank which can’t do it without the agreement of all the other countries
which belong to the Euro. Which is fair enough, as the supply of Euros
affects all their economies too not just the Greek one.The obvious and sensible thing for Greece to do is therefore to leave
the Euro and start controlling its own currency again. This will solve
the ‘money supply’ problem almost overnight – but deciding the exchange
rate to the Euro will be one of the first things the Greek politicians
will have to do, and is something for which they cannot escape
responsibility by blaming anyone else (but they’ll try to do that too).
Greeks will then be able to borrow money again – but not at Euro
interest rates!Leaving the European Union would be a much bigger decision, and probably
not a good idea for Greece as they would instantly lose nearly all of
what is at present their ‘home’ market (and the freedom to seek work
anywhere in the EU).
Celebrations after the anti-austerity referendum in Athens (Photo by Julia Bridget Hayes)
What follows, however, is anyone’s guess. Perhaps it could form the scenario for a science fiction novel.
In September 2015 Greece left the Eurozone, and the new drachma, based originally on IOUs issued to pay civil servants, though it started on par with the Euro, depreciated rapidly in value. The Greek government, driven by internally rather than externally imposed austerity, was forced to cut military expenditure, as imported military hardware became too expensive, and thus failed to meet its Nato commitments.
In April 2016, at the instigation of Germany and France, Greece was expelled from Nato, which encouraged Turkey to invade and occupy the Greek islands of Lesvos, Chios, Samos and Rhodes in May 2016.
Encouraged by the lack of resistance, in June 2016 Turkish forces invaded eastern Thrace, and defeated Greek forces at the battle of Xanthi. This opened the way for ISIS agents to stir up the Muslim population to turn against their neighbours, and ISIS thus established control of most of the towns and villages in the region outside Xanthi itself.
France and Germany assisted Turkey, their Nato ally, with arms and other material to defeat ISIS, but most of these were used to make further conquests in Northern Greece…
Notes from underground 