Bring Back the Drachma!

The never ending sturm und drang over the state of Greek debt, membership in the euro zone and the potential shocks of a debt default have moved from tragedy to comedy to monotony.

The solution is simple. It won’t be fast, it won’t be easy, but it will be a huge improvement for all concerned.

Let Greece go.

Hey Greece — if anyone is listening — just default on the debt and start anew. The rest of Europe has caused the country and everyone else enough agita: just let Greece leave the euro zone in peace. Sure, it will be a long torturous process, but at least Greece — and maybe the euro region — will start moving in the right direction.

In case anyone forgot: Greece never should have been in the euro zone in the first place. Based on the formal entry requirements, it never met the membership standards. With a little help from the Wall Street magicians it lied and cheated its way in, disguising its debt levels and fiscal health. AsSpiegel wrote five years ago, “Goldman Sachs helped the Greek government to mask the true extent of its deficit with the help of a derivatives deal that legally circumvented the EU Maastricht deficit rules.” Greece should have been given the treatment a teenage drinker would get after being discovered in a bar: tossed out and not allowed in until meeting the entry qualifications.

Regardless, it is now in Greece’s own best interests to show itself the door. There should be no doubt, as Martin Wolf points out in the Financial Times, that like most divorces, this one will be acrimonious. But the sooner it starts, the sooner Greece can begin the process of starting an economic recovery.

Despite the pain — and there will be substantial pain, I assure you — the benefits are many. Here are a few that might persuade Greece to pack its bags and leave the abusive relationship it’s in with the EU:

1) Bringing back the drachma: Greece would get to manage its own currency, and it can join in the rest of the world’s devaluation race to the bottom. As is, it is tied to the euro, which truth be told works best for the region’s most efficient producer, Germany. For other nations, the benefits are more modest. For Greece, the euro has been a huge negative for the past half-decade.

Don’t underestimate the advantages of a country such as Greece having its own currency. It will give it a level of control far greater than it has now.

A new drachma would fall, perhaps dramatically, versus the euro and dollar. That creates an opportunity to sell exports inexpensively versus the competition. Plus, it’s great for tourism, Greece’s biggest industry, and would help the country’s agriculture producers. It might also give Greece an opportunity to expand the service sector. If the Brits could do it, so can Greece!

2) An independent central bank:  Don’t sell short the advantages of having a Greek version of the Federal Reserve. What fun! A Greek central bank can hold pressers, host conferences and publish research. In the U.S., we do this thing with dots that’s just hilarious! It’s all terrific stuff, and will give Greece a wonky forum to bash Angela Merkel, just for kicks.

Caveat: It is important not to cause a global financial crisis or hyperinflation. If that happens, the I-told-you-so crowd will never shut up.

3) Tax collection: I know, I know: the Greek people don’t like to pay their taxes. Who does? Evasion costs the public coffers $30 billion a year. Athenians declare poverty, yet satellite photos of the city show 16,974 swimming pools, while its residents claim to have just 324.

As amusing as that is, Greeks have a choice: follow the strictures of the EU and the International Monetary Fund, as dictated by Germany, or take control of the future and make independent decisions. The only way that is going to happen is tax collection. The country will have to grow up and learn how to do it.

The bottom line is this: There is no easy end in sight for the absurd dance Greece has found itself stuck in with its European colleagues. It needs to start fresh. To quote my colleague Josh Brown, “The reason we’re all getting sick of the Greek drama is they haven’t killed off any main characters yet and it’s already season 5.”

Before season six begins, Greece and the EU should stop delaying and move toward the inevitable conclusion of this sorry spectacle.


Originally: Let Greece Go  




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  1. Iamthe50percent commented on Jun 19

    Maybe G-S should make the Greek debt good. A law suit for damages based on their fraud should be salutary for the whole world (less G-S).

    • 4MYGRANDKIDS commented on Jun 21

      Those who are dumb enough to loan to those who can’t pay back deserve to lose their money. Those who can’t control their spending deserve to go bankrupt.

    • Iamthe50percent commented on Jun 21

      Those dumb enough to lend relied on the knowingly fraudulent reports of Goldman-Sachs. That is criminal fraud. You would blame the mark instead of the con.

  2. VennData commented on Jun 19

    Vampire Squid in hummus.

  3. stonedwino commented on Jun 19

    BR, if you follow my @stonedwino twitter handle you may be aware that I’ve been saying for the last two years just that; “Bring back the Drachma.” It is the least of all evils. Current situation or any hammered out by the IMF or ECB will drive the country to ruin anyway. With Drachmas, Greek vacations will get way, way, way cheaper. Like they say in Greece Malaka Pusti!

  4. orsogrigio commented on Jun 19

    Greece, IMHO, is not the matter: the matter is Euro, and the whole of Germanocentric Europe. Officially if a second-row Country leaves (is kicked out) Euro, it is going to be doomed for ever, in perpetual famine. If a Country leaves Euro and survives (and, IMHO, definitely improves its situation) other will finally understand that the way is open: Italy in the first line, Portugal, Spain (and all other marginals) and in time France. A middle solution coud have been NEuro and SEuro (North & South Euro), the former with the 3% limit and the latter with, say, 6%. But doing this takes time and midnight oil, it’ s too late now. Greece has simply no possibility to pay its debts out, so either the debt is cancelled by the borrower or the debt is cancelled by the debtor, but that’s all, no third way. So either Germany cancels debt (and keeps Greece in the Euro, and bleeds out in time all the principal & interests, and gets ready to print Euro at a fantastic rate, since there will be Italian, Portuguese etc debts to ‘restructure’) or Greece goes to New Drachma. and exchange rate cancels debts automatically, Germany collects something of the principal (say a 40% haircut) and no interests. But, even if the second option is better for everybody, it’s politically a lame duck since Italy, Portugal etc will follow and IVth Reich has lost the IIIrd World War. Any way Euro is going either to devaluate (below 1 USD for sure) or disappear.. What should have been done ? When Greece called for help the first time, EEC should have immediately paid the debt out in cash, and expelled Greece from Euro, because Euro is like Caesar’s wife, you can’t even suspect of it. It would have cost just a few pennies, and would have had an enormous impact on markets (and on Italian, Portuguese, Spanish governments …). Down the road, mr. Draghi will solve the matter (and luckily you nowadays do not need to take forests down, a few keyboards are enough). I spent years dreaming of a true Europe, home for Europeans. There’s almost nothing left now. It’s sad.

  5. RW commented on Jun 19

    No one in Europe is talking about Greece exiting the Eurozone, not even the Germans.

    The “Euro” (currency union) is not the same as the Eurozone (trade/labor organization) even though they share many of the same institutions and, while exiting the former will probably prove beneficial for Greece in the long run, exiting the latter would just as probably prove catastrophic.

    NB: In macroeconomic terms it was pretty clear that, without the level of fiscal union necessary to facilitate wealth transfers to poorer countries (as we have here in the US with poorer states for e.g.), it was never likely the EU (unified currency project) was going to work out well for any country other than the very strongest European economies with Germany rather clearly at the top.

    • orsogrigio commented on Jun 20

      RW, you’re technically 100 % right. But things are quite more sour than the way they look. EU has come down to … nothing. Besides an enormous amount of useless paperwork by an overgrown bureaucracy , there is nothing : no political weight (we have a ‘Secretary of State ‘, called ms. Pesch who doesn’t even take part in foreign politics meetings), no common defense (let alone the even not dreamed about ‘European Army’), not even a common set of rules on work, taxation, healthcare, social security. Nothing, but strong rules on vegetables or fish sizes. That’s not much. Except from the Euro matter, no Country has relinquished a drop of its powers as an independent Country. On top of it, just add the cost of bureaucracy and of a ”’Parliament”’ made up as a golden retirement for political personnel (but, neverteless, without powers, so they do not make big damages). Blow Euro up, all EU will simply vanish. I’m very sad

  6. jmgregorio commented on Jun 20

    It’ll be interesting if they go with dual currencies, using the Drachma AND the Euro. Lots of policy possibilities… At the least, it would give them more opportunity to keep kicking the can down the road.

    • Currency Trader commented on Jun 20

      Like the Euro and: Pound or the Swissie or the Kroner or . . .

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