When Does Greece Leave The Euro Behind?

A couple of weeks ago I wrote a piece about Marine Pen Le Pen’s surge in French politics and her intent to unlink France from the Euro. The point was that Ms. Le Pen may or may not be the first to divorce the Euro but that someone in some EU country was going to do so simply because the road back to prosperity with the Euro was too long and torturous. Ambrose Evans-Pritchard furnishes an example of how difficult recovery is.

The Greek economy is still in a downward spiral. The IMF has pencilled in contraction of 4.2pc this year. The Greek think tank IOBE – which has been more accurate through this crisis – expects a fall of 5pc, and possibly 7pc.

Mr Schauble said Greece’s only option is to stick to tough reforms and restore the competitiveness by slashing the budget. “There is no short-cut. We Germans know this. Ten years ago we were the sick man of Europe. We had to take a long and painful path to become the anchor of stability in Europe.”

Professor Yanis Varoufakis from Athens University said the comparison with Germany confuses two different situations, repeating the discredited narrative that Europe’s crisis stems from overspending by the south, rather than from misaligned cycles and excess capital flows.

“Germany was able to piggyback on a booming global economy when it did its homework 10 years ago. If it had tried today with the rest of the eurozone imploding, and the US and China faltering, its reforms would have ended in ruin just like ours,” he said.

Prof Varoufakis said private investment has fallen 22pc over the past 12 months and is still crashing. “The banking sector is completely zombified. Companies cannot get a loan. The calamity goes on, and there is absolutely nothing in sight to reverse it ,” he said. The Hellenic Confederation of Merchants expects the economy to shed another 195,000 jobs this year as 55,000 small firms go bust.

To put it simply, the nightmare for Greece continues and as the article makes clear Germany is in no mood to provide further assistance. All that is not really new news. There was one paragraph at the end of the article which I want to highlight.

John Petley from International Monetary Research, said Greece would be recovering if it had left the euro when the crisis began. “By now it would probably be exporting its way back to growth with a more competitive drachma,” he said.

Chew on that for a minute. Though the pain might have been intense, the worst would be over had the Greeks just thrown in the towel several years ago. As it is, they are no closer to a resolution to a turning point for their economy. If European economies continue stuck in these downward spirals it’s merely a matter of time until some begin to opt out.

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