With
the Greek psyche itself the victim of a relentless shaming campaign,
the idea of Greece “going it alone” begins to seem outlandish and
quixotic. It is not. But it is as much tied to a revival of spirit
and self-esteem as to the nuts and bolts of economic transformation.
by
Michael Nevradakis
Part
5 - The argument for leaving the eurozone and the EU
If we truly
support and believe in open and robust public debate, then the
discussion as to whether Greece (or any other EU member-state) will
be better served by departing from the EU or eurozone must be a part
of that dialogue. So far, however, it has largely been excluded from
the public sphere and from anything resembling equal footing in
public discourse—whether that discussion is occurring in the media,
in academia, or in the political arena.
Even if one
is not a proponent of leaving the eurozone or the EU, the fiscally
and politically prudent thing to do would be to have a plan in place
for such a possibility. If, for instance, there is a collapse of the
Italian banking system—which is presently teetering on the edge—or
some other large-scale economic disaster in the eurozone, it’s not
outside the realm of possibility for a domino effect to impact the
entirety of Europe, forcing out some eurozone member states or
resulting in the collapse of the eurozone system itself.
If this
sounds far-fetched, consider the following: there are several
examples of currency unions breaking apart, such as that of the
Austro-Hungarian empire, or more recently the cases of the breakup of
the Czech-Slovak union or Latvia leaving what was essentially a
currency union with Russia in 1992.
While not
exactly like the eurozone today, in the 19th and early 20th century,
the Latin Monetary Union and the Scandinavian Monetary Union
attempted to create a currency peg across multiple countries—which
also occurred more recently in the lead-up to the launch of the
eurozone via the creation of the European Monetary Union. For
different reasons, both monetary unions ended up dissolving, with
member-states eliminating currency pegs between them.
More
recently, the United Kingdom departed the EMU in 1992 amidst
doom-and-gloom scenarios highly similar to those heard today about
departing the eurozone. Instead, what followed was one of the
strongest periods of economic growth in the UK’s history.
Further
precedent exists in the well-known examples of Argentina, which
repudiated the IMF’s austerity diktats and declared a stoppage of
payments on its public debt in 1999. What followed was over a decade
of economic growth which exceeded the global average, and indeed even
the eventual repayment of much of its previous debt at new terms that
it negotiated with most of its creditors.
Iceland,
following its banking collapse in 2008 which was, proportionally, the
largest collapse sustained by the banking sector in a developed
country in history, enacted policies which were in direct opposition
to those being recommended by the IMF. Banks were allowed to
collapse, foreign creditors were initially not repaid, bankers were
jailed. The economy soon boomed, with GDP growth exceeding EU and
eurozone averages and Iceland’s GDP eventually eclipsing
pre-collapse levels. Meanwhile, a devalued currency led to a tourism
and export boom. Eventually, creditors were repaid as well.
While
Iceland and Argentina were not a part of a common currency bloc,
their examples highlight how a nation can reject the austerity
demands of institutions such as the IMF, can declare a stoppage of
payments on its debt, roll back austerity, devalue its currency, and
swiftly return to economic growth. Moreover, Argentina broke its 1:1
currency peg to the U.S. dollar — which, while not the equivalent
to departing a currency union, had the result of restoring the
Argentine government’s ability to enact monetary policy instead of
being reliant on U.S. policy.
Therefore,
even the most vociferous supporter of “remain” would be well
advised to support the development of an exit plan in preparation for
a worst-case scenario which may well emerge from outside the
country’s borders. Unlike the “heroic” Yanis Varoufakis, who
negotiated so fiercely as finance minister in 2015 that he openly
stated he had no “plan B” and would not place “Grexit” on the
table even as a negotiating tool, such a plan would be the most
prudent option even for the most enthusiastically pro-EU regime.
The
paragraphs which follow will outline why a country like Greece must
consider leaving the eurozone and the EU, the various proposals which
have been put forth as to how this could be accomplished, and how a
departure could occur.
Source,
links:
Comments
Post a Comment