Grexit: - what a Euro mess!

It really is now time for Greece to be "set free" from the Euro

A health warning, Judicial Cat is not an economist. Indeed your blogger's only formal economics "training" took place over 20 years ago as part of a first year undergraduate course. That being said your blogger distinctly recalls some of the more obvious arguments against joining the Euro; when back in 1991 it was still some years away, but even then anyone with "sense" could predict the sort of events we witness today. The sovereign debt crisis may not have been predicted; however, what happens when their is a major disparity between the economies of say a northern European nation such as Germany, and a southern European nation such as Greece certainly where!

Billions just "thrown away"

For the past two years the EU and the IMF have literally thrown billions at attempting to solve the problem in Greece. Yet it remains unresolved. Every few months the political "elite" of Europe announce the latest "idea", which will finally solve the debt crisis. A few weeks later a new crisis then erupts ........ rinse and repeat. Whilst the continent's politicians refuse to face reality the majority of the citizens of Greece live in abject poverty. It can be argued the system in that country has a lot to answer for, and yes it does, but any student of history can see the reality in Greece is now becoming comparable with the days of the Weimar Republic in Germany during the inter war period. The only thing missing in Greece is hyper inflation.

Austerity, the elastic won't stretch anymore

It is ok for Frau Merkel to sit in her Chancellery in Berlin going on and on about austerity like some old "broken record"; however, it is not Germany facing the serious prospect of a breakdown in the social order of it's nation. Already there are reports of soup kitchens in Athens, children being passed to orphanages, as well as suicides. Let's not forget that Greece is a country, which was in the grip of a military dictatorship as recently as 1974. The recent inconclusive elections were conclusive in one respect; namely, the rejection by Greek voters of the mainstream parties of Pasok and New Democracy. So called "fringe" parties where the real "winners" in the election. When Greece returns to the polls (and they will very soon) expect the "fringe" parties to become the mainstream. Those parties, with their mandates, are not going to continue to take lectures from Chancellor Merkel. So either the eurozone and the IMF "back down" and continue to bail out Greece despite that country not following the terms of the bail out, or the money tap is finally turned off and Greece defaults and is forced out of the Euro.

With no mandate from the people to continue the austerity course imposed on Greece then it is obvious that something has to change. The only realistic option is for Greece to leave the Euro.

It might be painful but ultimately it will prove fruitful

Leaving the Euro will be chaotic, it will send "shivers" through every country on the continent. There will be bank runs, exchange controls, border closings and a few unpleasant things besides. That being said Greece will have a new currency and once again be in complete control of their own economy. They will be able to conduct their affairs for the benefit of the Greek people and once again become a fully sovereign state. A new Drachma will float on the markets and Greek exports will become competitive. Indeed the tourism industry will receive a boost from the favourable rate of any new Drachma to say the remaining Euro, the Dollar, or Sterling. A path would have been taken, which will ultimately lead to Greece restoring some national pride and some hope. What happens with the threat of contagion is for the remaining eurozone nations to worry about. The single currency was always a plainly daft idea without full fiscal and political union first. Like artificially created nations, this artificially created currency is facing the same fate; i.e. oblivion.

Remember "Black" Wednesday?

16 September 1992 is described as "Black Wednesday" in the UK. On that date the nation was forced out of the Exchange Rate Mechanism (ERM), the forerunner of the Euro. Despite the gloomy predictions the UK economy recovered and provided years of growth. All this as soon as Sterling was allowed to "float" and not be artificially locked into a "false" exchange rate with the then Deutsch Mark.

Ultimately Greece will leave the Euro so why not get it over with now and stop the further wasting of billions of euros of citizens' money and the breakdown of the social fabric in Greece.