4 thoughts on “After default: options for recovery in Greece”

  1. Posted 01/05/2012 at 19:06 | Permalink

    It seems to me that in either the cases, Greece has to opt out of EU.
    I do not see how in the second scenario they can reduce debit and gain competitiveness inside EU framework without infringing basic rules of fair trade and without having a solid export industry to get new markets outside EU.

  2. Posted 04/05/2012 at 09:13 | Permalink

    Leaving the Eurozone or the EU altogether is not an option – the public is against it, and the politicians are overwhelmingly in favour of staying. The costs of leaving are simply too big and no one has the courage or the strength to bear them. Besides, as I’ve pointed out in the text, a euro exit would seriously threaten the process of trying to achieve political stability. If the people, who are strongly opposed to an exit, see that their politicians are failing even in that perspective there could be no telling when Greece would be able to consolidate and start growing again. No depreciation, internal or external, will be of any help to Greece, as it will only hide the need to address the real problems – dramatically low productivity, corruption, non-functioning state institutions and above all endemic dependency of both the businesses and the people on the government.

  3. Posted 04/05/2012 at 11:06 | Permalink

    Yes I see your point, still I do not see how the second scenario is applicable if nor outside EU regulations.

    To regain competitiveness you have to go through inflationary policies, and that cannot be done with Euro. In order to keep social stability you have to pump up the welfare and thus you will get to increase the public debit and that won’t be allowed by Bundesbank.

    Greek people are scared of exiting from EU because they fear the unknown and are not informed about the known, but it is Stockholm syndrome…you feel addicted to your torturer…

  4. Posted 04/05/2012 at 13:05 | Permalink

    Not necessarily. It really depends on what has caused lower productivity and a less competitive economy. In the Greek scenario this was caused by a redistributive welfare state and cronyism so it must be addressed this way. Staying within the EU will be necessary in order to achieve political stability. There is no telling what may happen once they exit, purely from a psychological perspective.

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