Default and exit from the eurozone? Greece could begin again

[FarCenter]

Greece is heading for an exit from the euro, and the rest of the eurozone periphery may follow, precipitating a huge change in the EU. After the crisis, Greece could slowly recover

by Costas Lapavitsas

Greece is approaching the climax of its crisis, and its choices will influence the course of Europe for years. Although Greece represents only 2% of the European Union’s GDP, the impact of those choices will be wide.

The Greek crisis is fundamentally the result of its membership of the eurozone. Greece is paying the price for a belief in the ancient fallacy that possessing “hard” money puts a weak economy on a par with the strong. In reality, “hard” money is more likely to destroy a weak economy, a lesson about to be re-learned in Portugal, Ireland and Spain. Greece is heading for an exit from the euro and the rest of the eurozone periphery is likely to follow, with severe implications for the monetary union. Coping with an exit will require the reintroduction of economic controls, a major retreat from the neoliberal, pro-market approach to economic policy.

http://mondediplo.com/2012/06/02greece

[LiberalAndProud]

1. That was an interesting read.

The short-term shock of exit is part of the cost of escaping from the trap of the EMU. Greece would subsequently need an extensive programme of redistribution of income and wealth as well as industrial policy to steer its economy towards long-term growth. It would need to restructure its state, cleansing it of corruption.

In today's global climate, I wonder how realistic this assessment.

[girl gone mad]

2. Better than the usual hysterical tripe.

[ProgressiveEconomist]

3. IMO once Greece can start printing drachmas again, it can monetize

new debt and part of old debt. And if resulting inflation eventually stabilizes, it may be able to roll over old debt into new long-term bonds denominated in drachmas.

Compared to the alternative of remaining in thrall to Germany and the Euro for decades, such a path IMO will prove attractive to the Greek majority, and might even work eventually.

[AverageJoe90]

5. Thank goodness for the Greek left. =) nt

[shimonitanegi]

4. I think that the issue is no longer about Greece but

all about Spain and Italy.

http://www.washingtonpost.com/business/2012/06/01/gJQAu1HMAV_story.html