4 ms·
That's just not the case. When Greece had its own currency, it could devalue against the Deutsche Mark and keep people employed. That devaluation would cause s
by rsj_hn 8y ago
That's just not the case.
When Greece had its own currency, it could devalue against the Deutsche Mark and keep people employed. That devaluation would cause some inflation and it would also raise interest rates a bit -- no debt bubble, no collapse of Greek industry. Rather, German industry finds that it's currency is more expensive to counteract increased Germany productivity and Germany fails to export more, and thus does not accumulate excess savings. There is no flow of jobs from Greece to Germany -- Greece keeps its jobs, Germany keeps its jobs, Greece is forced to consume a bit less with the lower Drachma relative to Germany, and Greece is forced to borrow a bit less with the higher interest rates.
With a forced peg against the DM, money was just being vacuumed out of Greece, which created a recycling problem in which excess German savings could be used to purchase Greek bonds. That lowers the interest rate in Greece artificially, creating more debt in Greece even while Greek production becomes less competitive and Greek jobs leave for Germany. That never ends well, and was only caused by the Euro.
The crisis was just the unravelling of the above unsustainable trends, but these trends were created by the Euro. You can't "until the crisis, Greece was creating these problems" -- the problems were created by the Euro.
The same thing for Greece's problems collecting taxes. When governments can't collect taxes efficiently, they print more money, creating more inflation, which is basically a tax on financial assets. So the money is still collected by the Greek government. Now that the Greek government was no longer able to print money, it was at the mercy of financial markets -- international financial markets, which of course can't help the Greek government collect money in the same way that an inflation tax can.
Greece simply has never been in a position where it could give up its own currency and join a pegged regime with Germany. All of this was foreseen as part of the folly of the European project. There are other bad effects, too.
- tormeh 8y agoWell, the Greek government cooked the books in order to be allowed to join. This is clearly Greece's fault. The real lesson is that weak and corrupt governments are bad for most involved with them and very hard to fix, even if you try very hard. So, if you can, keep them at arm's length. They should never have been allowed to join the euro. In fact, given their conflicts with Turkey and Macedonia, they shouldn't have been allowed to join the EU at all.
- jaclaz 8y ago>Well, the Greek government cooked the books in order to be allowed to join. This is clearly Greece's fault. Yes and no. Those reviewing those books (and originally allowing Greece to enter the Euro) were rather blind (selective or politically induced blindness).
- StavrosK 8y ago> their conflicts with Turkey What conflicts are these, pray tell? If you think Erdogan is just sitting quietly, minding his own business, while the evil Greeks plot to expand their empire into Turkey, you're either dangerously misguided or a troll.
- mikeash 8y agoNothing about that comment implied anything about which side is right or which side is the aggressor.
- StavrosK 8y agoThat's what "they shouldn't have been allowed to join the EU at all" means. Unless you're saying that countries bordering aggressive nations should be banned from joining.
- mikeash 8y agoWhy not say that? International relations isn’t a morality play. Joining into a union with a nation likely to get pulled into a conflict you don’t want isn’t a good idea. EU membership isn’t an award for good behavior, it’s a strategic choice made to achieve certain goals.
- StavrosK 8y agoWhy have allies, if you're going to be obliged to help them if they get attacked? Because the relationship is beneficial in other ways, of course.
- samastur 8y agoGenerally good analysis, except lower exports and consuming less generally leads to fewer jobs (you don't employ people if you can't sell fruits of their work).
- addicted 8y agoThere is no reason to believe Greece was better off outside the EU. While they suffered from the ill effects of using the same currency as Germany, outside the EU they would probably have suffered from the much bigger Greek crisis, which is the absolute inability to collect taxes from the rich. Taxes that are on the books. It’s very likely that despite benefitting from the ability to devalue their currency, that benefit would have been overridden because of all the other structural issues The EU forced Greece to address.
- Arnt 8y agoWhen Greece had its own currency, it could devaluate... but that that would keep people employed doesn't follow. Back when the Greek had the Drachma, the the Greek state had to pay high interest on its debt, and part of the reason for that was the possibility of a devaluation. The high cost of debt service was a burden on the economy, including on employment.
- timwaagh 8y agoit is not like we forced them to adopt the euro. they wanted it very much. they wanted it much more than nations with stable currencies. i remember when i was on holiday as a kid around 1999 when the banking euro was introduced there were all these signs with prices in ECU (European Currency Unit). Back home everything was still in Guilders. My dad told me it would yet be a long time before greece would be financially stable enough to adopt the euro. yet they wanted it so much they used some creative bookkeeping to get in the same time we in holland did. was that the smartest thing ever? maybe not. but it was their choice. perhaps if the books had not been cooked, we would not have accepted them into the euro. And they would not be in this situation.
- axilmar 8y agoGreek here. You said: > no collapse of Greek industry. In fact, Greece's industries have collapsed during the late 70s, 80s and 90s, when Greece had the Drachma. The reason is economies of scale: local industries cannot compete with global ones.